The Indian tax environment is challenging. It's complex, ever-changing and tax authorities often perceived to be "aggressive" and "revenue biased". It is often said that tax officers exercising quasi-judicial functions who are required to act judiciously hesitate for fear of being perceived as "favoring" tax payers. So generally, most tax disputes get decided in favor of the revenue at the adjudication stage. One can reasonably hope for redressal only at the Tribunal stage or above.
The other aspect is the time taken for tax disputes to get resolved. Businesses and businessmen cannot be expected to do the rounds of tax offices to get what is legitimately due under the law. Once a tax "dissonance" between the tax authorities and the tax payer is "born", it doesn't get resolved quickly. A quick decision comes only when the Revenue is clear about the tax position. Even if the law can be seen to be in favor of the taxpayer, the officers are inhibited to take such a decision. Again, this is because, officers fear they would be seen as favoring the tax payer. So usually the issue gets passed around, escalated upwards or finally a notice gets issued which generally (disregarding exceptions) means, it will take a long time to get settled.
Appellate procedures are painfully slow as the system is clogged. And costly. Many tax laws require an upfront deposit of tax upfront at least to pursue an appeal. Even when an order is frivolous. Such pre-deposits are practically lost to the business for several years even when they have an excellent case. No one expects that legitimate taxes should not be collected. But only fairly.Indeed effective from 1st October, pre-deposits have been made mandatory in any appeal even at the first stage before the collector.This simply means even if the taxpayer has a good case which will ultimately get settled in his favor, he nevertheless has to pay up the mandatory pre-deposit to get his appeal entertained.
All this makes Indian tax environment uncertain and business unfriendly. More importantly upfront pre-deposits adds to the financial stress. Foreign investors are wary. Only tax advisers have a field day! Not a conducive atmosphere to do ethical business to thrive.
The mine field of Indian taxation, compels taxpayers to be knowledgeable, cautious and alert to avoid serious repurcussions even benign mistakes. They are required to be diligent in every business step which is relevant for tax.
While we may need some Big Bang changes like GST and DTC, what we immediately need is change in the way taxes are administered. Much emphasis has been made on changing the law. What we need is a change in mind-set. Standards which should include time bound delivery should be set for tax authorities to serve tax payers. The tax environment has to become more tax payer friendly, cooperative, less adversarial. It is no one’s case that taxes should not be collected. But there is no need to become Shylocks in the process.
Tax Quotient (TQ) is promoted by like minded tax professionals with decades of experience in the Indian Government and also in the industry at senior levels managing Central, State and local taxes for large multinationals and Indian business groups.
TQ's mission is to keep tax payers continuously informed, simplify the understanding of taxes and enable paying taxes correctly. Not more, not less. By doing this TQ intends to help improve tax compliance and to introduce a clean and fair tax system in India.
TQ intends to highlight unfair treatment continuously and to point out to incongruent laws and practices which cause uncertainty, needless litigation, waste of time and resources. TQ also intends to underscore situations which allow use of discretion by tax authorities to minimize the scope for creating vested interests.
We are committed to keep our readers informed through information on latest trends, articles, in-depth analysis and sharing of experiences etc. about the impact of the latest developments in tax law on various segments of the society and industry.
To assist tax payers to identify hidden tax risks or preventing missed opportunities by thoroughly reviewing their systems and processes. Tax payers are welcome to contact us to seek clarification on any tax issue.