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Govt made little effort to ensure tax compliance
April, 19th 2012

The comptroller and auditor general (CAG) in its report for 2010-11 has said the state government suffered losses of Rs 510 crore from leakages and mismanagement in the collection of taxes.

The revenue section of the report has not only documented losses in the management of land, but also misappropriation in the collection of sales tax, VAT, stamp duty registration, excise, motor vehicles tax, electricity duty, education tax and entertainment duty, which has led to inadequate tax compliance. This has eventually led to fiscal imbalances in the finances of the state government, CAG said.

But the state's overall tax revenue increased by Rs 15,921 crore, an increase of 27% over last year. The increase was mainly on account of increased collection from land revenue, which jumped by 53% in 2010-11 over the previous year. But this was still not enough. "According to the 13th finance commission, revenue deficit must be brought down to zero in 2011-12, for which efforts must be made to increase tax compliance and collect revenue arrears," CAG said.

The report has cited widespread malpractice in the Mumbai region, leading to losses especially in stamp duty charges, and motor vehicle and sales taxes. Misappropriations leading to revenue implications of Rs 250 crore have been pointed out in the collection of electricity duty. Under the scanner is Maharashtra State Electricity Distribution Company (MSEDCL) and its blatant disregard for the provisions of the Bombay Electricity Duty Act, 1958. In one case, the MSEDCL collected electricity duty of Rs 1,476 crore. But only a part of this was remitted to the government treasury. The interest of Rs 5.45 crore on delayed payment was never recovered.

CAG reported underassessment and short/non levy of stamp duty in as many as 379 cases, resulting in a loss of Rs 14 crore. Not surprisingly, with soaring property prices, most cases were reported from the Mumbai region. Of the total, 322 cases were related to undervaluation of property. In a high profile case, a multiplex cinema at Phoenix Mills, Lower Parel, was charged stamp duty on the market cost of Rs 47 crore, while the actual cost of the land was Rs 72 crore. In other cases, a loss of Rs 68 lakh was incurred when a high-profile developer was allowed benefit in the treatment of an instrument of exchange of property.

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