by Harish Gupta, National Editor, Lokmat Group
Tax in India has long been a matter of negotiation rather than obligation. Earlier this year, pending indirect tax disputes in concerned appellate tribunal and the high courts and Supreme Court stood at 136,365. The number was so staggering that the government was forced to find excuses to withdraw appeals in minor disputes ranging from Rs 10 lakh to Rs 15 lakh. Yet the tax revenue now frozen in disputes at various levels is well over five lakh crore of rupees. Besides, Indian companies" 'hunger' for exemption led successive regimes to succumb to make changes in to the tax laws. It has resulted in many large companies being 'zero-tax'. The country's tax administration has, over the decades, left its public finance permanently starved.
But there are signs of change this year. As Finance Minister Arun Jaitley has promised in his budget speech, the exemption culture is nearing its end. Besides, there is a never-seen-before seriousness about tax collection. In the past one month, I have received text reminders on my mobile almost on a daily basis that the last date for e-filing of tax return is drawing near. And the determination to respect the collection targets is bearing fruit at the macro level. Direct tax collection shot up almost 25 per cent in the April-June period, to Rs 1.24 lakh crores, this year. What seems to have worked is a shift in the rules by making advance tax payable in four tranches from this year instead of three. After accounting for refunds, net growth in personal income tax is a whopping 48.75 per cent.
And the Income-Tax Department has put its finger on the jugular; it is now targeting the high-value transactions, about 14 lakh, carried out without declaring PAN numbers. The letters being issued to the parties will have only two options: to own up the transaction, or deny it. For the guilty, it should open up a Pandora's box of evaded taxes.
The Modi administration's approach to tax evasions and money-laundering is different from its predecessors'. It is in a figurative sense, one of shaking up the tree rather than wasting effort to pluck the individual fruit. The government's onslaught on money-laundering began earlier this year with Enforcement Directorate raiding the Kolkata residence of Kashinath Tapuriah and his wife Chandrika. The raids conducted in the earlier regimes was coinsidered an eyewash. The couple are reportedly strongly interlinked with Pune stud-farm owner Hassan Ali Khan, whose name has repeatedly surfaced on lists of Indians having billions of dollars stashed in Swiss banks. Kasinath is brother of the late Priyamvada Birla and Candrika is the daughter of the late Haridas Mundhra. ED suspects the duo, due to their position in India's business world, is a most trusted channel for the rich and famous to transfer their unaccounted money to offshore funds. It is quite a big tree to shake up. That"s why Kolkata is called the Hawala Capital of India.
Undeterred by political consequences of tough actions by his enforcement officials, Modi has of late nodded his approval to a series of raids on offices and homes of Delhi's high-profile deal-makers
Equally spectacular is the recent raid in Mumbai and elsewhere on the owners of the Agro Nutri Food is believed to be the nucleus of a tax-evasion network in Madhya Pradesh. A team of 60 officers and 100 policemen were deployed for the raid. Prime Minister Modi has got accolades for the emphasis his government has given to the Income Disclosure Scheme by September 30 (now extended to make payments in three extra installments). But the first declaration date remains unchanged. He recently reminded a gathering of jewellers and gold traders, "You all know who comes to you in carts with money and how it moves. Tell your friends to disclose. Otherwise, I'll have no option but to commit the sin (paap) of putting tax-dodgers behind bars". But irrespective of disclosures under IDS, the government raided 990 companies in the past two years and unearthed Rs 43,829 crores in black money. Last year's IDS, however, had low yield—only Rs 2,476 crore. But this year the intensity of raids is at fever pitch, with more and more big guns being cornered.
One of them is a top real estate Mumbai based tycoon, whose name also figured in the leaked 'Panama Papers'. The raids continued across the country, including metros like Delhi and Mumbai. News of the raid led to the share prices of the Group's listed firms tanking. The documents that investigators accessed reportedly hold leads to multiple aspects of tax evasion—notably transfer of undeclared assets, benami transactions and misrepresenting incomes as 'corporate borrowings'. The trail led to even tycoon's politically connected mother-in-law in Haryana. It transpires that a diary reportedly recovered from his residence had recorded a mind-boggling list of VIPs including those belonging to the ruling party as recipients of slush funds. It can well be Jain Hawala Version 2. The tycoon is having sleepless nights sitting in London.
Undeterred by political consequences of tough actions by his enforcement officials, Modi has of late nodded his approval to a series of raids on offices and homes of Delhi’s high-profile deal-makers like one Lodha or Deepak Talwar. The rich haul of a diary, CD and hard disks from these three raids is pointing at a system rotten to the core, with none excepted from the rot—bureaucrats, members of the judiciary, and of course politicians. A journalist's name has also figured in the list. Chasing black money has led to the unfolding of a society based on corruption. Modi must be finding it difficult with whom he should share platform with as he keeps launching one scheme or the other with all kinds of celebrities, rubbing shoulders with tycoons and trusted bureaucrats too.
In the past, when government raid parties stumbled on ‘sensitive’ information, the powerful persons to be implicated promptly pulled political strings, and their names would disappear from prosecution records (the Jain hawala diary popped up at the insistence of the Supreme Court). But Modi is a tough cookie, a fact that even a respected journal like The Economist, no fan of the BJP, has admitted. It wrote (July 16 edition): “…under Narendra Modi India’s prime minister, tycoons appear to have lost their direct access to ministers’ offices”.
