Large taxpayer units to be shut down under GST
After the Planning Commission, yet another UPA government relic is set to fall. Large Taxpayers Units (LTUs) scheme, a dream project of the UPA government, is set to be abolished with the introduction of Goods and Service Tax (GST) regime.
CBEC documents on structural changes under GST, accessed by DNA Money, show that the much-hyped single window tax facilitator for large taxpayers would be abolished a decade after it was formed in 2006.
Some experts believe that LTUs failed to fulfill the expectation of large taxpayers. TR Rustagi, former joint secretary of ministry of finance, toldDNA Money, “LTU was not a great success. It would die its natural death with the introduction of GST."
Some tax experts and former bureaucrats, however, supported the relevance of LTUs in the GST regime. Sumit Dutt Majumder, former chairman of Central Board of Excise and Customs (CBEC), said, “We must not abandon LTUs. Rather, we should extend the concept to STUs (Small Taxpayers Units) in the GST regime. And, as mentioned, it can have CGST and SGST authorities and income tax authorities as its constituents.”
The first LTU, created basically as a trade facilitation measure, was opened in Bengaluru on October 1, 2006. At present, there are five LTUs zonal headquarters, each at Bengaluru, Chennai, Delhi, Kolkata and Mumbai.
In the 2005-06 Budget speech, the then finance minister P Chidambaram said, "As a measure of facilitation, I propose to follow international practice and establish LTUs. To begin with, these units will be set up in major cities. I would like to invite large taxpayers, whether of corporate tax or income tax or excise duties or service tax, to participate in the programme and avail of the single window service."
However, the Tax Administration Reform Commission, chaired by Parthasarathi Shome, said the progress of LTUs, however, has been far from satisfactory, as not many large taxpayers have joined these LTUs.
The concept of LTU came from the International Monetary Fund (IMF), which recommended that countries which are facing revenue crisis needed to reform their tax administration. India has been facing similar challenge as about 90% of the tax revenue has mopped from 10% of the taxpayers. The idea behind LTUs was to focus on large taxpayers.
LTUs are aimed at helping the taxpayers to interact with the officers of all central taxes—central excise, service tax and income tax—under one roof. The idea has been that the physical proximity of officers of these three departments will speed up the resolving of inter-departmental issues. A collateral advantage for the government was that there was scope to have a 360-degree profiling by the three departments sitting under the same roof.
However, LTUs could not give desired results on the ground. In January 2016, IT group Nasscom raised administrative and operational difficulties in LTUs, suggesting their dismantling.
The American Chamber of Commerce in India too strongly reacted against credit transfer issue in LTUs. Initially, the government allowed LTUs to transfer Cenvat (Central VAT) credit availed by one registered premise to other registered premise under a single PAN. But the Union Budget 2014 cut the benefits for LTUs by disallowing such inter-unit transfer.
The amendment has limited cross-utilisation of credit between units of a LTU which was one of the key benefits to register under the LTU scheme. The American Chamber of Commerce in India said, “The LTU scheme was announced to bring some relief for large taxpayers by providing them administrative convenience and other fiscal benefits, but this amendment will hamper the said intent.”