West Bengal: Tax and Economic Reforms
During the last two decades West Bengal has led the rest of the country with regard to agricultural performance and implementation of panchayat institutions. But these developments have begun to level out. At the same time the state has fallen behind in other sectors–industry, higher education and state of public finances, particularly–to an extent that is seriously worrying. With regard to industrial revival, the state stresses public investment in transport and communication, measures to improve higher education, foster industry-university collaborations, and help smallscale industries overcome specific market imperfections (access to credit, technology and distribution channels). In public finance, emphasis is placed on raising tax revenues (especially with regard to the service sector), limiting losses of public sector undertakings, and widening the scope of land taxes and user fees. In the agricultural sector, the need for a greater role of the government with regard to biotechnology, extension services, irrigation and flood control is emphasised, along with suggestions for encouraging and regulating contract farming with MNCs. Further, geraterempowerment of panchayats with regard to social service delivery and agro-business development, and administrative reforms to enhance accountability of state government employees.
GDP- ₹11.20083 lakh crore (US$170 billion) (nominal GSDP at current prices; 2017-18)
₹7.29 lakh crore (US$120.93 billion) (nominal NSDP at factor cost in 2014-15, base year 2004-05)
International $612 billion (GSDP PPP at market prices in 2017-18)
GDP rank – 6th (nominal GSDP, 2014-15)
GDP growth – 7.1% (nominal GSDP Y-o-Y growth, 2015-16)
GDP per Capita -US$1437(nominal GSDP per capita, 2015-16)
Critical issues such as Ease of Doing Business, land reforms and labour regulations are in the state domain. The state is quite successful in garnering these opportunities for economic development. As a result the state has become sixth largest economy, and recorded a state GDP growth rate of over 11% from 2004-05 to 2014-15. Further, Confederation of Indian Industry (CII) has identified sectors with high potential for the state including Agri& Food Processing, Infrastructure, Manufacturing & MSMEs, ICT & e-Governance, Tourism, Healthcare, Education & Skill Development, Power & Energy and Environmental Sustainability.
Steps taken by state for economic reform:-
- West Bengal had the lone reform in 2016 in the space of reforms and ease of doing business, easing regulations governing employment of teachers.
- Tenancy Reform:-Agricultural tenancy reform during 1970s offering security of tenure to tenants and regulating the share of output that is paid as rent on farm productivity.Under these laws, if tenants registered with the Department of Land Revenue, they would be entitled to permanent and inheritable tenure on the land they sharecropped as long as they paid the landlord at least 25 percent of output as rent. In the decade following the launching of Operation Barga, there was a significant improvement in the terms of tenants’ contracts and more secure tenure. Moreover, agricultural productivity grew faster in West Bengal compared to other states in India, earning the administration praise from many.
- Industrial Reform:- In West Bengal industrialization was peak during 1980s. Since than state is facing de- industrialization. Government has taken many initiative for re- industrialization.
EX- The state government’s proposal to set up six new theme-based township projects at Siliguri (education and health), Bolpur (culture), Asansol (industry), Kalyani (information technology), Howrah (sports) and Baruipur (senior citizen).All the six theme-based townships are on government land, and such land is limited. Acquiring land has proved to be the major bottleneck for growth of infrastructure and industry. The story of Tata’s proposed Nano project in Singur is too well-known for repetition.
- Bengal Government has invested Rs 2,000 crore for improving infrastructure at Petrapole; bordering Bangladesh.
- PPP Policy 2012:- West Bengal is the only state which has introduced a State Policy on Public Private Partnership (PPP) to facilitate private investment in infrastructure including physical and social infrastructure. The objective of this policy is to enhance the quality of life of the people of the state by providing better and efficient public services through participation of the private sector.
- Initiatives of State Government for Ease of doing business:-Government of West Bengal has been in the forefront of initiatives undertaken for enabling Ease of Doing Business in West Bengal. The key to these reforms has been Business Process Reengineering leading to a Simplified Tax Regime and e-Governance(In VAT Administration; In Stamp Duty and Registration; In Excise Department; In Finance Department) for improved service delivery.
- Simplified Tax Regime:-The Government of West Bengal intends to keep the tax system simple, fair, transparent and predictable to encourage the development of the private sector and the formalisation of the economy. Ease of Paying Taxes, is, therefore a crucial element in Ease of Doing Business and a stimulus in fostering co-operative State-Business Relationship. In an effort to stimulate economic growth and create a more business friendly environment, keeping with the global trends, the Government of West Bengal, during the last one year(from 2015-16), has introduced significant reforms in tax policy and tax administration thereby reducing the compliance cost of paying major State taxes considerably.
- E-Governance:- The significant e-Governance based tax policy initiatives introduced by the new Government in major tax structures are:-
- In VAT Administration:-
- e-Registration – West Bengal is the only State in the country to have made e-registration mandatory along with introduction of dematerialized Registration Certificate
- e-Sahaj– West Bengal is one of the few States in the country to have made Online Return filing compulsory for all dealers for all the Acts.
- Simplified System of Self-Audit by the Taxpayers
– Taxpayers with annual turnover between Rs. 1.5 – Rs. 3 crore would have to submit only a “SelfAudited Statement” instead of Final Accounts audited by a Chartered Accountant or a Cost Accountant.
- Simplified Way Bill Generation
– Introduction of on-line generation of a singledocument dematerialized waybill. The State Government has also allowed e-waybill facility to unregistered dealers.
- Amnesty Scheme for Registration – allowing unregistered dealers to get registered on payment of only a nominal percentage of their declared taxable turnover.
- Online VAT refund and payment of refund through Electronic Clearing System
– payment of industrial assistance to the small and medium scale industrial units is made through Electronic Clearing System and the amount is directly credited to the dealer’s bank account.
- Payment of Industrial Promotion Assistance (IPA) claims are being made through ECS (NEFT) and application for IPA are also being received on-line.
- Online submission of form 16 exercising option for Composition Scheme
- e-Anti-evasion Complaint Service
- e-Sales Tax Deduction at Source (TDS) Service
- e-Application for Industrial Promotion Assistance Scheme
- Introduction of the scheme of VAT Return Preparers
- Introduction of Digital Signature Certificate (DSC) in return
*Introduction of New Decision Support System
- In Stamp Duty and Registration:-
- Introduction of Computerised Registration in all 239 Registration offices in the State:
– One day delivery system introduced.
– Easy searching of records throughout the computerised period.
– Issuance of computerized certified copy from scanned document.
– Facility of Registration in the office of Registrar of Assurance, Kolkata for any property located anywhere in West Bengal
- Rationalization of Stamp Duty
- National Land Records Modernization Programme (NLRMP): – Registration and its simultaneous mutation of the property under L & LR Deptt. under a single window system.
- Introduction of e-stamping system and Other Facility for property registration.
- Launching of website of the Registration and Stamp Revenue Directorate.
- In Excise Department:-
- Launching of website of Excise Department
- Introduction of system for receiving duties and fees through e-gateway of bank
- Introduction of Import Pass for Bulk Spirit (IPBS)
- In the Finance Department :-
- Introduction of web-based online file tracking and management system – will enable the individual Department to know the status of the file at any point of time.
- GRIPS – online and off-line receipts of tax and non-tax revenue through Government Receipts Portal System in electronic mode and incorporation in the e-Treasury through Reserve Bank of India.
State Incentives to the Industry:-The State of West Bengal offers some of the best incentives to the industries for promotion of Industrial Investment in the State. The Incentives to the industry have been revised under the “The West Bengal State Support for Industries Scheme, 2013”. Various incentives like Tax holidays, Patent Registration, Credit availability to industries; export incentives, single window etc. have been incorporated in it.
SOME MORE SCHEMES OF STATE GOVERNMENT FOR ECONOMIC REFORM:-
- Industrial Promotion Assistance (IPA)
- Waiver of Electricity Duty.
- Addition Incentive on Generation of Employment for industries
- Stamp Duty rationalization i.e. Exemption from Stamp Duty etc.
- Fiscal Incentives for Investment under Scale – 2, 3 & 4
- Faster and easy Patent Registration.
- Waiver and Land conversion Fee.
TAX REFORMS IN WEST BENGAL:-
Constitution of India in Part seven define tax domain of central and state government. Taxes like sales taxes, VAT, State excise duty, entertainment tax, professional taxes etc. falls in domain of state government. Apart from these some other taxes like Octori, Property tax, Cesses of state tax subject, local levy and local body (Panchayat and Municipal) taxes also falls under state subject.
Tax reforms undertaken recently by government of West Bengal:-
TAX REFORMS UNDERTAKEN :-
- Tax Administration Reforms Tax Policy Reforms
- Direct Reforms * REFORMS IN VAT LAWS
- Indirect Reforms (Through ICT & Process Reengineering)
- Direct Administration Reforms: Reorganisation in the Directorate of Commercial Taxes:-
Re-organization of the Enforcement Wing :- The enforcement wing, the Bureau of Investigation has been trifurcated into three wing spatially covering the entire state. To further rationalize, each such Unit was subdivided in Zones. The existing domain of Charge/Circle was kept in mind while demarcating the respective are of operation for such Zone.
- Tax Administration Reforms: Reorganization in the Bureau of Investigation:-
A comparative collection figure of direct tax recovered by the reorganised Bureau of Investigation on y-o-y basis goes to reflect reasonable progress.
- Tax Administration Reforms: Formation of the Data Analysis Wing (DAW):-
The main function of this Wing is the analysis of the database to tap the probable evasion of tax. This is done by utilizing the huge database of digitised information. Data Analysis Wing has so far generated more than 400 (Four Hundred) reports.
DAW HAS GENERATED REPORTS ON :-
- DEALER WISE ANALYSIS OF TREND OF PAYMENT OF TAX IN SUCCESSIVE FINANCIAL YEARS.
- COMMODITY-WISE COLLECTION, TREND, ANALYSIS AND PROJECTION FOR THE GOVT FROM TIME TO TIME.
- IMPORT OF GOODS FROM OUTSIDE TO WEST BENGAL.
- MOVEMENT OF GOODS USING WEST BENGAL AS TRANSIT.
- IDENTIFICATION OF FAKE CLAIMS FOR INPUT TAX CREDIT BY DEALERS
- SHARED DATA WITH OTHER STATES AS WELL AS CENTRAL GOVT TAX AGENCIES
- SALE-PURCHASE MISMATCH
- CENTRALIZED NOTICES TO DEALERS
- PROVISIONAL ASSESSMENT
- UNAUTHORIZED ITC FROM DEALERS
- Administrative Reforms through Greater Use of Information and Communication Technology in Directorate of Commercial Taxes:- E. Online registration of dealers under WBVAT, CST and WBST Act.
- Compulsory e-registration
- Complete e-processing including
– electronic submission of query, if needed,
– submission of online response by dealers and its receipt by the system,
– facility for tracking the status of the application over web and
– Generation of Registration Certificate.
- No pre-registration hearing of the prospective dealer
- Significant reduction of service delivery time with the Issue of RC online.
- Tatkhanik (instant) registration – New scheme for companies registered under Companies Act, and for dealers already registered with Central Excise or Service Tax or any other state VAT.
- Composite VAT Registration (CVN)
– Immediate registration for small traders dealing exclusively in intra-state trade.
– Fixed payment of taxes (Rs 12000/Rs 7000 p. a.)
– No need to file return or maintain book for VAT compliance.
– Will not be assessed or audited.
– No visit by Tax Officers
- Indirect Administrative Reforms through Greater Use of Information and Communication Technology in Directorate of Commercial Taxes:-I. E. Online filing of VAT, CST and WBST returns.
- Mandatory e-filing of returns by all dealers
- Automatic arithmetical scrutiny of the returns filed
- Setting up of authorised facilitation centres to assist dealers, if needed
- Dealers can also take the help of Vat Return Preparers (VRPs) trained by the directorate
- Introduction of Digital Signature Certificate (DSC):-
- Dealer can file electronic return using Digital Signature
- Thus, no need to submit paper returns
- To popularize the use of Digital Signature Certificate ( DSC ) an incentive scheme introduced to encourage and help small dealers in procuring DSC free of cost
- Online payment and digitization of over the counter payment through GRIPS:-
- Compulsory e-Payment for dealers having tax liability more than Rs 2 lakh per annum
- E-Payments are received in the state through the ‘Government Receipt Portal system'(‘GRIPS‘). • One common portal for all Government Receipts.
- Smaller dealers can also use GRIPS challan to make Over The Counter (OTC) payments.
- No need to file hard copy of challans in case of e-Payments.
- 80% of tax payment is through e-Payment
- All nationalised banks and selected (major) private banks authorised to collect taxes
- Online application, generation and printing of dematerialised CST related Forms:-
- No manual issue of ‘C’ forms and ‘F’ forms.
- Online issue, filing and processing of ‘C’ forms and ‘F’ forms.
- Dealers may generate ‘C’ and ‘F’ forms electronically based on the return data.
- Generation of CST forms is immediate.
- All CST forms issuance and utilisation data is fully updated and available on TINXSYS simultaneously.
- System of physical production of ‘C’ and ‘F’ forms done away with.
- Mere filing of the statement online on our portal and matching with TINXSYS suffices.
- Installation of State of the art Server for Internal Application (IMPACT)
- VAT Refund and Payment through ECS:-
- To speed up refund the Directorate had earlier introduced e filing of application and refund through ECS mode.
- During 2012-13, the Directorate introduced online verification of ITC
- Documentation has been reduced to the bare minimum
- Online filing of refund application, its processing
- Facility for tracking the status and transfer of refund amount to the bank account of the assessed electronically.
- E-Industrial Promotion Assistance Scheme (e-IPAS):-
- Government of West Bengal refunds a certain portion of tax paid by certain class of manufacturers as assistance to industrial promotion
- In online e-IPAS, dealer is able to apply for such assistance online and also gets the assistance online through ECS in his bank account.
- Online Dealer’s Profile:-
- Confidential access to Dealer’s Profile
- Dealer can access information of his/her profile related to :-
– Tax payment
– Central Declaration Forms
– Sale Purchase mismatch
– Publishing of all notification and dealer related information
- Any time updating of contact information and generation of password.
- Road Ahead For Greater Use of Information and Communication Technology in Directorate of Commercial Taxes:-
- Online Appeal, Revision & Review :
– E-service for online appeal, revision and review and generation of modified demand.
– A copy of the notices will be sent to dealer’s profile along with print copies.
– Notifications will be sent by SMS and email to dealer during the processing of appeal cases.
– This will help the taxpayers avail the judicial forum more easily and also help the administration to follow up such cases.
- Document Management System
– Introducing the Document Management System and its integration with IMPACT
– This service would ensure proper maintenance of all documents submitted by dealer and generated at the office for easy searching and retrieval by all users
– Internal processes would become virtual (paperless)
– Seamless integration of different internal processes viz. Return filing, Scrutiny, Assessment/Audit, Appeal, Recovery
– Integration with electronic issue of notices (emails) and SMS intimation
– Automatic alert to dealers at each stage of internal processing.
- Tax Policy Reforms by Directorate of Commercial Taxes:-
– Dealer is deemed assessed on the date of submission of return
– Major reform in law to practically do away with assessment
– No routine assessment
– To be done in specific actionable intelligence
– Instead of routine assessments, Audit of few dealers selected randomly based on RISK ANALYSIS and Dealer profiling
– Audit report gets converted into demand and no further assessment and hence avoidance of duplication
- AUDIT BY C.A. OR COST ACCOUNTANT:-
- Audit only when turnover exceeds Rs 5 Crore
- Concept of self audit introduced for dealers with turnover between 1.5 Cr to 5 Crore. This has reduced the cost of compliance and unnecessary harassment.
- OTHER TAX REFORMS:-
- Provision of disallowance of input tax credit for non-maintenance of stock register done away with
- Filing of appeal means automatic stay of demand. No separate petition needed. Saves the cost to the dealer and effort of the directorate.
- FINALLY, Report of the Third Party Audit on e-Services of Commercial Taxes:-
- Report of Third Party Audit on e-Registration
- Report of Third Party Audit on e-Refund
- Report of Third Party Audit on e-Return
- Report of Third Party Audit on e-STDS
- Report of Third Party Audit on e-Payment
- Report of Third Party Audit on e-Forms & Automated Notice Issuing System etc.
Apart from these structural reforms state government announced some more tax changes like-
- Abolition of agricultural land (khajna in Bengali) tax below the stipulated upper limit (of six acres) . The decision is expected to provide relief to an estimated 55 lakh small and medium farmers in the State and it will cost the State about ₹200 crore in revenue.
- The State Budget 2015-16 announced that threshold limit of annual turnover for payment of VAT to be enhanced from INR 5 Lakhs to INR 10 Lakhs;
- Threshold annual turnover limit for submitting VAT Audit Report enhanced from INR 5 Crs to INR 10 Crs – filing of self-audit statement by dealers with an annual turnover of less than Rs. 10 Crs. done away with;
- Input Tax Credit on duty credit scrips proposed to be allowed to manufacturers also.
- The time of VAT refunds has decreased from eight to nine months (2010-11) to just one month.
- At present, Profession Tax enrolment is required for online VAT registration. The Government has proposed to integrate the online system so that a dealer can obtain both of them at a time.
Gently all these indirect tax have been subsumed in goods and service tax (GST).Under the new system, the state government has minimal say in future tax reform. All the decision related to text structure will be taken by GST Council which is a federal body.