India Upgrading Tax IT System

August 4, 2011 Taxation in India

IBM System x3650Indian tax authorities will soon overhaul their IT systems, in order to introduce a new centralized sales tax, and improve tax compliance.

Following a meeting between the Minister of Finance of India Pranab Mukherjee and the Chairman of the Empowered Committee of State Finance Ministers Sushil Modi on August 3rd, it was reveled that the country is scheduled to take its first practical steps towards implementing the long delayed Goods and Service Tax.

At the conclusion of the meeting the Finance Minister announced that Empowered Committee will hold a panel meeting on the August 19th to discuss the IT infrastructure that will be required to successfully implement the new GST tax. The panel is expected to report to the Finance Minister after the meeting, outlining what steps will need to be taken to ensure that India’s tax authorities are capable of effectively processing GST filings. It is expected that the new IT system will allow tax information sharing between states’ tax authorities and the country’s central tax administration.

India has seen continued delays to the implementation of a new GST system, due to repeated disagreements between state governments and the central tax authority. The goods and service tax is intended to consolidate and centralize the country’s numerous sales taxes, and subsume all the states’ sales taxes into GST. Opponents to the proposal argue that GST would strip states of their autonomy, and separate state tax collections from final revenues. To address the issue, the new IT system will allow for accurate tracking to determine in which region the GST tax is collected. It is expected that the Committee’s overhaul plan will also make contingencies which will allow India’s tax IT infrastructure to be upgraded and expanded to reconcile and cross check GST with declared income returns, fostering greater levels of tax compliance.

Photo by kktryj