An Ace Agenda

The economy loses crores of rupees each year due to tax evasion. Even the
largest multinationals, at some point of time resort to window dressing to
manipulate their account books in order to escape a higher tax bracket. Since
taxes form an important component of the governments fiscal policy, and are
also a major source of revenue generation, reducing the incidence of tax default
assumes prime importance to the government. Automation of Central Excise and
Service Tax (ACES), an initiative by the Central Board of Excise and Customs is
a step towards a default-proof system.

Process and Intricacies

Through the ACES application, all major processes in Central and Service Tax
will be automated, the outcome of which will be a more transparent and
accountable tax collection/payment system. There are two reasons for us to
switch to the electronic medium, says Yashodhan Parande, director general,
Directorate General of Systems. The first is to increase transparency, and the
second is to build up efficiency within the system. Not only will it be easier
for the tax officials to keep a track of taxpayers, but it will also increase
accountability within the system, as it will be easier for junior officers to be
monitored by their seniors. From the taxpayers perspective too, the entire
process will be faster and simpler, he explains. The registration process is
quick. A new assessee has to login to the ACES website (www.aces.gov.in) and
choose the excise tax/service tax link. The next step is to apply for a user id
and login using the id. The user then has to proceed with the statutory
registration with Central Excise or Service Tax, as the case may be.

Filing tax returns through the ACES website simplifies the earlier complicated tax payment system

The ACES application has already been rolled out in Bengaluru, Coimbatore,
Belapur, Bhubaneshwar, along with two projects in Chennai (LTU and Service Tax).
According to Parande, the project will be introduced nationally by the end of
the current financial year.

To enable people to understand how the system works, there is a learning
management module available on the ACES website. This works as an audiovisual
tutorial with step-by-step instructions on the electronic filing of tax returns.
There is also a toll free number on which people can call. Every call gets
transferred to an agent who will try and guide you. We call this Level-1. If the
problem cannot be resolved at Level-1, it will go to Level-2 where a more
skilled professional will take care of the issue, says Parande.

Electronic Accounting System in Excise and Service Tax (EASIEST), launched in
2007, was a similar step aimed at digitization of the system. Under this, all
tax assessees paying Rs 50 lakh or more as duty have to compulsorily pay their
tax/duty electronically through Internet banking. EASIEST and ACES are separate
projects that are linked to each other, says Parande. The complicated system of
having to pay taxes by filling four challan copies was simplified by EASIEST,
under which only one copy has to be filled. An added benefit is the facility for
online verification of the status of tax payment using ones challan
identification number (CIN).

Earlier tax returns were filled through self assessment; a taxpayer would
identify himself to be in a particular tax bracket, and then file his returns
accordingly. Under ACES, information about the amount an individual receives in
his bank account is sent to the CBEC electronically, and they deduct the
appropriate tax. The taxpayer will also be updated in a similar way. This makes
the system foolproof, and the usual practice of account manipulation by
organizations will be done away with. Benefits of the process include online
tracking of the status of applications and claims, online facility to view
documents like registration certification, returns, etc, and an internal
messaging system for faster communication.

We intend to reduce physical contact between tax officials and the common man Yashodhan Parande, director general, Directorate General of Systems

Potential Trouble Zones

Making it mandatory to file returns electronically raises doubts about its
feasibility in India, where Internet penetration still hasnt reached the
grassroots, and where server crashes are not uncommon. In answer to this,
Parande says, Since payment is compulsory only for those who pay above Rs 50
lakh, this shouldnt be a problem. The system is targeted at big players who
will not have net penetration issues. Those below this bracket have the option
of filing returns manually. However, our vendors are bound by service level
agreements, and we have taken measures like making large investments to check
our servers. In spite of this, the network is liable to failure at times. But as
tax returns have to be filed only once a month (or in some cases once in a
quarter), this doesnt pose to be an issue.

In a country where tax evasion cases are rampant, transformation to the
electronic medium may pave way for new forms of cyber crime. Increases in cases
of online account hacking and other transgressions are a close reality. This
assumes importance with cyber law in India still being in its nascent stage, as
a result of which successfully convicting criminals is often difficult. An
evasion is an evasionwhether online or offline. Moreover, cyber law is
advancing at a fast pace, says Parande, when questioned on this.

The application uses digital signatures implying that every document
submitted has to be signed digitally at each stage, both by the assessees, as
well as by the department users. When asked about whether the long, tedious
procedure of applying for a digital signature certificate (DSC) would defeat the
very purpose of simplifying the system through ACES, Parande says, The
Directorate General of Systems and Data Management is itself an authorized DSC
issuing body, so this doesnt pose to be a problem.

The Near Future

With India planning to roll out Goods and Services Tax (GST) by the next
fiscal, there will be modifications required in the ACES application. According
to Parande, GST requires a sturdy technological infrastructure. With GST, there
will be a drastic change in the type of returns and government control. These
differences will have to be accommodated within the ACES system as and when GST
comes into place. With ACES, there will be a base to the technological
infrastructure that GST requires. The investment required to make the changes
will be expensive, though they will not be difficult to accommodate as the core
processes remain the same.

With ACES in place, taxpayers wont have to visit government offices time
and again. We intend to reduce physical contact between taxation officials and
the common man, explains Parande. When asked about the feedback, he says that
on the whole it has been positive, in spite of a couple of problems reported
initially. Nonetheless, this mission mode project (MMP) of the prime minister
under the e-governance plan is another step taken by the government towards
reducing harm to the honest, everyday taxpayer.

Vandana Sebastian

vandanase@cybermedia.co.in