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July 6, 2020

Govt Clarifies News Report of talks of Merger between CBDT and CBIC Incorrect

by Mahesh Mara in Compliance Law, Income Tax

Govt Clarifies News Report of talks of Merger between CBDT and CBIC Incorrect

The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. The lockdown though necessary has led to a disastrous impact on the economy. The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax deadline extensions. As the outbreak spreads, some organisations and individuals are stuck with costs but no revenues. Some organisations may be facing shortfalls so dire that they feel they have no choice but to lay workers off. But many organizations may be able to take other, far-less disruptive measures. There was talk in media of The Government of India is considering a proposal to merge the Central Board of Direct Taxes (CBDT) and Central Board of Indirect Taxes and Customs (CBIC) as part of cost-cutting efforts amid revenue loss.

What does the CBDT do?

The Central Board of Direct Taxes is a statutory authority functioning under the Central Board of Revenue Act, 1963 who deals with matters relating to levy and collection of direct taxes. It provides inputs for policy making and planning of direct taxes. It is also responsible for administration and implementation of direct tax laws.

What does the CBIC do?

Central Board of Indirect Taxes and Customs is a part of the Department of Revenue under the Ministry of Finance which deals with the tasks of formulation of policy concerning levy and collection of Customs, Central Excise duties, Central Goods & Services Tax and IGST, prevention of smuggling and administration of matters relating to Customs, Central Excise, Central Goods & Services Tax, IGST and Narcotics to the extent under CBIC’s purview.

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Merger of CBDT and CBIC is not a new concept

  • The idea of merging both the boards has been suggested on previous occasions.
  • The Tax Administration Reform Commission had suggested the move in 2014. The CBIC was then called the Central Board of Excise and Customs.
  • The idea had been suggested in 2011 by then Union Law Minister M Veerappa Moily. He had suggested to the then Finance Minister Pranab Mukherjee to merge CBDT and CBEC for tackling black money effectively as per reports.
  • The IMF and the World Bank have encouraged such thoughts on integration on multiple occasions as per reports.
  • Former CBDT member Akhilesh Ranjan said, “Theoretically this can be done. Several countries like the UK have a unified service. But considering the administrative formations that we have for Income Tax, Customs and GST separately, it will mean a lot of upheaval without much benefit. Also the GST setup is distinct, with the GST Council setting policy.”

What is the present situation?

At present, the CBDT and the CBIC have independent financial powers to decide how much they would spend on tax generation. The budgets are being managed by the Department of Revenue. The two Boards share data, helping them in detecting income irregularities or mismatches between IT returns and GST filings.

What would the merger mean?

  • The proposal to merge the two tax wings is back on the table along with plans for a massive downsizing.
  • Apart from freezing new jobs, the direct and indirect tax boards are looking at job cuts with a proposal for a merger.
  • If approved, the merger would follow massive downsizing at all levels including a freeze on hiring for the Indian Revenue Service (IRS) for Customs and Income Tax. Generally the Government informs the Union Public Service Commission every year how many employees it need. Allegedly it has been said that this year the recruitment to the IRS has been reduced to a half of the last year.
  • Furthermore, the government will also reconsider filling the existing jobs that are lying vacant.
  • The merger will also lead to changes in retirement rules and cutting down on employee allowances.
  • Various job categories may be merged while revenue officers may be shifted to other departments.

Instructions have also been given to heads of departments to limit key expenditures by CBDT. If the same is not complied with, certain future expenditures (like expenditure of legal matters, losses written off, repair and maintenance costs, rewards to informants etc) may not be sanctioned. The COVID 19 pandemic has certainly been a taxing time for all and although the Government is trying to support the citizens and its economy, certain difficult measures will be also taken in order to sustain.

News report of Merger of two Boards of Revenue factually incorrect

Government has no proposal to merge two Boards created under the Central Boards of Revenue Act, 1963

A news item has been published today in a leading newspaper that the Government is considering proposal to merge the Central Board of Direct Taxes and Central Board of Indirect Taxes and Customs. This news item is factually incorrect as the Government has no proposal to merge the two Boards created under the Central Boards of Revenue Act, 1963. It has been published without due verification of facts from the competent authorities of Ministry of Finance and only creates a policy distraction when the Ministry is amidst implementation of a large number of taxpayers’ friendly reforms like transition from manual assessment based on territorial jurisdiction to a completely randomized electronic faceless assessment, electronic verification or transactions and faceless appeals.

As pointed out in the report, the said merger was one of the recommendations of the Tax Administrative Reforms Commission (TARC). The report of TARC was examined in detail by the Government and this recommendation of TARC was not accepted by the Government. As a part on an assurance made by the Government in the Parliament in response to a Parliament question, the Government has also placed this fact in 2018 before the Committee on Government Assurances. The action taken report on the recommendations of the TARC is placed even on the website of Department of Revenue, which clearly shows that this recommendation was not accepted.

It is evident that this misleading article has been published with no due diligence of even checking official records placed in the public domain or checking the latest status with relevant competent authorities in the Ministry of Finance. It not only reflects poorly on the quality of journalism but also shows a complete disregard for due diligence. If such an unverified story is given a front-page lead story position, it should be a concern for all news reading public. This news item is completely rejected as baseless and unverified.

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