As part of the government’s efforts to contain the costs of operations amid increasing revenue loss, the proposal to merge the direct and indirect tax boards is back on the table, with a massive downsizing of the cadre at all levels.
These could include a freeze on hiring for the Indian Revenue Service (IRS), changes in retirement rules, merging job categories, shifting revenue officers to other departments, and curtailing allowances of employees, said official sources. The austerity drive has begun amid the global pandemic, which has derailed the economy and widened the fiscal deficit.
“Both the tax boards, in concurrence with the finance ministry, are working on cost-cutting measures. Certain proposals have been discussed, such as a unified structure, which would help in creating synergies with a reduced workforce,” said a person privy to the discussion.
As of now, the Central Board of Direct Taxes (CBDT) and Central Board of Indirect Taxes and Customs (CBIC) have independent financial powers to decide how much they would spend on tax generation.
The Tax Administration Reform Commission, under Parthasarthi Shome, the then advisor to the finance minister, had first suggested, in 2014, merging these two boards. The CBIC was then called the Central Board of Excise and Customs.
Since then the proposal has been taken up in various fora. Its 550-page report had said the two boards must embark on “selective convergences immediately to achieve better tax governance, and, in the next five years, move towards a unified management structure with a common board for both direct and indirect taxes”.
Former CBDT member Akhilesh Ranjan said: “Theoretically this can be done. Several countries like the UK have a unified service. But considering the administrative formations that we have for income tax (I-T), Customs, and goods and services tax (GST) separately, it will mean a lot of upheaval without much benefit. Also, the GST set-up is distinct, with the GST Council setting policy.”
At present, the two boards draft tax policies, and the Department of Revenue handles the budgets for carrying out their functions. Besides, they share data, helping them in spotting income anomalies or mismatches between GST filings and I-T returns. Further, creating posts will be reviewed. Apart from freezing new jobs, the two boards are looking at those created in the past two years. Those that lie vacant may not be filled.
Recently, the CBDT instructed its heads of departments to limit key expenditures. Or else, certain future expenditures, including those on legal matters, write-off losses, repair and maintenance costs, and rewards to informants, may not be sanctioned.
Reducing entrants to the IRS, both for Customs and I-T, is being considered. Generally, the government informs the Union Public Service Commission every year how many it needs. Sources say this year the recruitment to the IRS has been reduced to half of that of last year. However, the number of IRS vacancies will be known after the results of the civil services examination come out. In 2019, 60 I-T officers had been recruited, against 65 in 2018 and 169 in 2017.