CBEC Gets Good
Marks in Self Financed Survey
The
Central Board of Excise & Customs (CBEC) had requested FICCI to conduct a
tax payers’ experience survey with the objective of garnering a feedback on
impact that reforms undertaken during the last two years had on the ground.
FICCI outsourced the survey to KPMG and they jointly reached out to 40000-45000
potential respondents across India. The survey was accompanied with a flier
detailing the reforms carried out by the CBEC in the last two years (attached).
The key question of the survey was – “Do you feel a
perceptible change in policies of the CBEC by way of becoming liberal and
friendly to the taxpayer?” An overwhelming number of respondents, 72%,
responded with a “yes” The fact that a tax department had the gumption to ask
such a question and the tax payer’s having actually acknowledged positively,
both are a harbinger of increasing maturity of the regulatory eco system of
India.
The
questionnaire centred upon four themes –
Interaction
experience with senior and junior functionaries of the department
Dispute
resolution
Information
Technology Enabled Services
Refund
claims
Evaluation
of sectoral reforms undertaken by the CBEC.
As business demographics would suggest, respondents
from Maharashtra outnumbered all states, with respondents making up for 30%,
Delhi followed at number 2, with 11%. Sectoral
responses showed that 46% respondents from service industry, 39% from
manufacturing and 15% from the trading community. This trend reveals the
importance that service tax has acquired over the years, broadening the tax
payer base and accounting for Rs. 2, 11,456 crore
which is 26% of the Indirect Tax revenue.
The responses showed that 45% of the respondents saw an
attitudinal change in senior functionaries (Commissioner level
and above); and 51% acknowledged an improvement at the ground level, at the
level of inspectors and above. This should come as heartening news for India Inc, as it is the inspector raj which is considered as the
most stubborn stumbling block to improving the tax environment. In wake of
widespread allegations of tax terrorism, which has most often been cited as a
barrier to entry of foreign investment in manufacturing, the survey sought an
opinion on whether the CBEC administration was becoming less adversarial. 32% of the respondents answered in the
affirmative, which is indicative of an improving trend but does show that much
needs to be done. The most outstanding achievement of the CBEC was getting the
customs single window project off-the-block on 1st April 2016. Interestingly, USA
had also launched its single window in the same period but had to eventually
stagger dates for accommodating different government agencies and had to infact drop FDA altogether for the time being. In India’s
case the project was a top most priority with the PMO and Cabinet Secretary,
which brought together 6 ministries on a single window. CBEC’s team evolved a
unique methodology to solve teething problems by creating a whatsapp
group for continuously receiving a feedback on operational issues faced by the
trade and disseminating solutions. At the ports, customs brokers made their own
whatsapp groups to share experiences and information.
The implementation of the project has shown the power of the digital
applications in problem solving and CBEC’s adaptability in being able to
successfully leverage it. In a short span of time, the single window has had a
huge impact on custom clearance processes. The survey saw respondents
acknowledge the improvement. 76% respondents found improvement in customs
clearance process. For a highly IT driven department, it was also very
heartening to note that 75% of the respondents were satisfied by the IT enabled
services.
Responses on sectoral reforms
also generally received a thumbs up, including refunds. 49% of respondents acknowledged
a positive change in processing of refunds. Of most interest to foreign
businesses were responses to reforms undertaken in SVB (transfer pricing in
customs) where 89% of the respondents indicated improvements. Similarly,
responses on legislative changes carried out to warehousing in the budget also
elicited a positive response from 85% of the respondents. Considering the make
in India initiative, central excise has been a major area of focus. 92% of the
respondents have acknowledged CBEC’s success in simplification of customs &
excise business processes.
After
this poll, FICCI & KPMG have also given to the CBEC a wish list of
respondents. The 10 MUST Dos are:
1. Infuse
attitudinal changes
2. Focus
on Tax evaders
3. Simplify
Procedures
4. Fast
track adjudication
5. Reduce
litigation
6. Expedite
refunds
7. Introduce
e-communication
8. Improve
website and IT Platform
9. Enhance
training
10. Improve
Office infrastructure
A
case study of a typical exemption with 27% duty foregone.
Typical
unit will go bankrupt summoning resources for Surety.
Working
capital will be crowded out by sureties!
Prohibited
goods can be released against 25% security under Sec 111 of CA, SEZ goods only
25% but IGCR import for manufacture under “Make in India” 100% security without
running bond!
|
|
|
Rs Cr. |
|
A |
Annual Production |
60,000 |
|
B |
Value add @ 20% in Manufacture |
10,000 |
|
C |
Parts, Components Accessories Import |
50,000 |
|
D |
Import Budget per Manufacture (Assume 50 Importers) |
1,000 |
|
E |
Monthly Import |
83 |
|
F |
Production Cycle 3 months |
250 |
|
|
|
Month |
|||
|
|
|
1 |
2 |
3 |
Cum at month 3 |
|
A |
Import Purchase |
83 |
83 |
83 |
250 |
|
B |
Consumption |
60 |
70 |
80 |
210 |
|
C |
Inventory |
23 |
36 |
39 |
39 |
|
D |
Surety amount @ 27% duty foregone on (A) import purchase |
22 |
44 |
56 |
66 |
|
E |
Surety on
inventory in Running Bond Mode (not applicable now) |
6 |
10 |
17 |
|