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Able to meet indirect tax target
August, 19th 2009

Earlier this month V Sridhar, a 1973-batch Indian Revenue Service officer, took over as the chairman of the Central board of Excise and Customs (CBEC). A recipient of Presidential award for distinguished service in the department, Mr Sridhar comes to the helm of CEBC at a time when indirect tax collections have been very poor. Excerpts of interview with ET:

The indirect tax collections in the first quarter do not look too good. Will you be able to meet the target for the current financial year?

You would recall that to provide stimulus to the economy the government had cut both excise and service tax rates. In fact, the Cenvat rate was brought down from 16% to 8% in the last financial year. There have been some minor changes in excise duty in the Budget, but the cuts would have some impact on the revenue growth. But keeping all this in view, target for 2009-10 was set at the same level as last year.

Initial trends have not been very encouraging, but with the economy showing some signs of revival, we are hopeful of improvement in collections now. All the indirect taxes put together, we should be able to meet the target. (The 2009-10 Budget has estimated combined collection from customs, excise and service tax at Rs 2.69 lakh crore. The total mobilisation in first quarter was down 29% to Rs 44,692 crore)

Do you feel that the misuse of cenvat credit is also one of the reasons why collections are not up to expectation? Is the CBEC looking at sectors where the abuse would be high?

Collections in the current financial year are down primarily because of the reduction in rates. There may be some problem with regard to the cenvat credit utilisation, but then this is not something new that has cropped up suddenly. You have to see that there has been a drastic cut in excise rates and the economy itself was reeling under a slowdown. So, both excise and customs collections have been affected. We have also cut service tax rates to 10%; so there has been some impact on service tax as well.

Excise evasion continues to be a big problem. Last year, the CBEC took some tough measures against pan masala and gutkha sector. Are you looking to extend these measures to other sectors as well?

We had introduced production-based levy for pan masala and gutkha sector, which was a huge success. Collections from the sector have grown four-fold. Now, the effort is to ensure that it does not slip back. At present, we have not yet looked at extending this system to any other sector. The main focus this year would be to use more effectively the information garnered through third party information system launched last year. The information received would act as an important intelligence tool to tackle with evasion.

What about the exchange of information on Value Added Tax from states. Has the system been institutionalised?

At present, we receive information on VAT in a more informal manner. But, once ACES (Automation of Central Excise and Service Tax ) is extended to all commissionerates in the country by the year end, we would be able to put in place a formal institutional framework to receive information from states and transform it into intelligence.

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