Revenue department to target self-employed, smaller cities to widen tax base

NEW DELHI: The revenue department is looking to widen the tax base by targeting the self-employed and smaller cities and towns as a key element of its strategy for this financial year.

Sources said the blueprint for this year's strategy is being readied by North Block based on inputs it gets from field offices. Typically, the finance minister and the revenue department brass discuss the strategy with senior tax officials from across the country every summer.

In case of direct taxes, the focus of the strategy will be on the self-employed, including professionals as well as business. Although the proposed rollout of the goods and services tax ( GST) from next April is expected to help widen the indirect tax base, the government wants to begin the exercise from the current financial year itself, especially in case of service tax, which accounts for more than half the economic activity in India.

The revenue department is looking to ask its service tax officers to focus on the Tier-II and Tier-III towns, besides instructing them to ensure that service providers don't use loopholes to escape the tax net.

Widening the tax base is seen as a key element of the government's strategy to increase the tax-GDP ratio, which is very low in India, and also deal with the issue of black money. The Narendra Modi government has articulated it strategy to not just focus on getting illicit funds stashed abroad back into the country but to also look at domestic black money. In the last budget, finance minister Arun Jaitley announced several measures such as a new law on benami transactions as well as a ban on any cash transaction beyond Rs 20,000 for property transactions, including payment of advance. Often, tax officials have discovered large cash volumes during raids, which have been passed off as advance money for property transactions but now the government is trying to plug that gap.

For years, the government has been talking about widening the tax base as the salaried often complain that they have to bear the burden of higher taxes as the revenue department has failed to bring in more people under the net. While tax is deducted at source for the salaried, professionals and businessmen often do not disclose their entire income, and evade taxes. The prevalence of a large cash economy helps them escape paying their dues.