The Gujarat Commercial Tax Department face the problem of dealing with numerous stake holder (Currently around half a million), and maintain their records manually. These records have large financial implication. A manual register catering to such large members resulted in a lack of transparency, collusion between official and evaders and law tax compliance leading therefore to a loss of public revenue.
In India as per the division of powers under the constitution, States collect VAT on sale of goods. The Commercial Tax Department, Government of Gujarat, India mainly administers the tax on intra-state and inter-state sale of goods, viz. Gujarat Value Added Tax Act, 2003 (VAT) and Central Sales Act, 1956 (CST). Tax payers (dealers) interact, directly or through tax practitioners, with the Department for obtaining new registration, amendments to it, cancellation, filing periodic returns, obtaining Statutory forms, way bills for border check posts, return scrutiny, assessments, refunds, appeals, advance rulings, enforcement, check post activities, etc.
At present there are 5.01 lakh live dealers under VAT and 3.03 lakh live dealers under Central Sales Tax Act, 1956. The department is divided into 11 divisions, 25 ranges, 103 units and 15 border check-posts and a training institute. The registrations and other functions are area based and there is a strong one-to one relationship between the dealers and officers. Revenue implications are high as total collections are around Rs 45,000 crore. Every year refund of around Rs 3000 crore is given. Data volume is high. Before computerization, tax payers had to visit VAT offices multiple times and give applications in hard copy with their signature, for every activity or service mentioned above.
Department also followed manual processes. There were errors, omissions, delays and grievances like Inefficiency, Lethargy, Delay in decision making, Corruption, etc. Cost of compliance and cost of collection were on a higher side. Internal controls and audit trails were also weak. Delivery of services was full of hassles and idea of merely delivering services dominated the quality of services delivered. Public image was low. Concept of a responsive public administration did not exist .
As described in details here-under, today, one of the most essential ingredients of successful VAT administration in Gujarat has been the innovative use of technology and business process re-engineering of legacy multi-stage manual systems of tax administration and delivery of services to the tax payers, tax practitioners and tax administrators. Key areas needing improvement in service delivery were:
Registration: As per the VAT Act & Rules dealer is required to take the registration if taxable turnover exceeds Rs.0.5 million. Dealer can also voluntarily apply for the Registration. Along with Registration, application dealer had to submit documents and security deposit as per the discretion of concern officer. A dealer can issue Tax invoice only after obtaining Registration Number from Commercial Tax Department. Before the initiative, dealers had to visit government office many times to get registration which was not serving the purpose of faceless operation and transparency; the chances of corruption and mental harass were high. As a result, dealer was not able to get registration in time. We have provide a single platform to the investors for information/approvals from all departments/agencies of Government.
CST-Forms: Statutory Form C (for inter-state purchases), Form H (for purchases in the course of export) and Form F (for branch transfer / consignment / Stock transfer) under the Central Sales tax Act, 1956 (CST) are very important for the tax payers as they can buy at zero / reduced rate of tax. These forms are to be obtained from the Commercial Tax offices only. The process of issuing forms was manual. Application with annexure and fees, 3 to 4 stages for verification of application and than issue the CST physical form. Rate of tax at present for purchases against C form is 2%, else tax payer has to pay either 5% or 15%. There is no tax for purchases / procurement of goods against form H and F. Every year more than 12 lakh forms were issued manually.
Border Checkpost Forms: In interstate transaction, dealers are sending/receiving the goods from/to other state to/from Gujarat. At checkpost, the goods carrying vehicle has to show/submit the checkpost form issued by Commercial Tax Department. Dealer was required to visit at government office to apply and receive check post forms. There were the occasions of multiple visits of dealers to officials of Commercial Tax Department which were wasting the time and increase the chances of corruption.
System to receive the grievance: There was no online system to receive details of grievances from dealers for delay in service or incidences of corruption.