Direct Tax Reforms Soon: Zero Contact, GSTN-like Backbone

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The government is working on big-ticket direct tax reforms and improve ease of compliance to complement the sharp reduction in the rates to make the regime more attractive for investors.

Under the new regime that is in advance stage of preparation there will be zero physical interface between taxpayers and officials, cutting discretion of officers, government officials said. “Faceless assessment has been a game-changer… focus now will be on improving the consumer interface of the department further,” one of them told ET.

A dedicated body for direct taxes on the lines of Goods and Services Tax Network (GSTN) to provide data and information backbone is also under consideration, another official said. It would provide the direct taxes department the professional input that the indirect taxes get from GSTN while serving as a data repository.

At present, the income tax department’s IT functions are managed internally by the systems directorate. An official said the department’s technology interface has increased to 80% with policy input being just 20%, which makes a professional set up urgent.

GSTN set up to handle the IT backbone of GST had both private sectors as well as government representation, but has now been brought under government ambit. The faceless assessment has enhanced the IT interface and seeks to bring about more specialisation in the way the department functions. This will also lead to increased use of artificial intelligence besides making sectoral expertise imperative.

India is ranked 115th on the ‘ease of paying taxes’ parameter in the World Bank’s Ease of Doing Business ranking while overall, the country is placed at 63rd position. Last year, India had cut the corporate tax rate to 22% and that for new manufacturing companies to 15%, bringing the rates on a par with competitors in a bid to attract investments. The reworked processes are expected to make the regime more attractive.

In the case of personal income tax, the department is focusing on pre-filled forms and has now introduced a facility that reflects all transactions such as credit card or sale or purchase of property in an individual’s Form 26AS. The move is aimed at making tax payments easier and also ensuring non-intrusive compliance.

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