The State government has reportedly failed to realise tax arrears worth Rs.23,026 crore due from various sources.
As per official estimates, the total arrears payable from different sources amounted to Rs.32,326 crore, of which about Rs.9,300 crore remained entangled in litigation.
But there were no legal hurdles in collecting the Rs.23,026 crore that had been pending for a while. Bureaucratic laxity and lack of a political initiative were reportedly delaying the recovery.
Official sources told The Hindu here that a major share of the arrears was due from the Sales Tax Department. Input tax evasion was also rampant among traders. (When a company registered for Value Added Tax (VAT) buys goods or services from another supplier, VAT was charged at 17.5 per cent of the purchase cost. This is the input tax. Similarly, when a company sells its own goods or services, it charges the buyer VAT at the same rate and that is output tax).
Once in four months, every trader has to complete a VAT return, giving details of its input and output taxes. If input tax was greater than output tax, the trader can claim the difference. There were complaints that these claims were often not duly verified and there was substantial revenue loss on this count, sources said.
But for stray efforts, no consistent and result-oriented steps were being taken against traders who tend to evade tax. Under-assessment and short-levy of departments had been costing the State dear for years. Precious little was being done to plug the revenue leak being reported so. Also, sales and building taxes, land registration, and other direct tax sources also remained thoroughly under-assessed.
While tax payers and a section of enforcement officials acted in collusion to evade taxes due to the State through under-assessment and short-levy, the political leadership failed to act in time and the result was substantial revenue loss. Even after imposing fresh taxes to tide over the financial crisis, recovery of arrears was still not a priority of the government, sources said.
