Excise: not yet .IN

The government departments have taken steps towards pushing
the thousands of component exporters and importers in the automobile, oil,
manufacturing, and construction sectors, among others, to file their import
returns online. But are the assessees voting with their keyboards? Hardly, says
V Sridhar, director general-Systems and Data Management, Directorate-General of
Systems and Data Management (DGSDM). The man who could be termed the CIO of
India’s formidable excise department, feels that the verdict is clear:
e-filing of returns is yet to take off.

India’s average connectivity speeds languish in the region
of 64 kbps and broadband connectivity, though cheaper by at least 40% in comparison with
over a year ago, is struggling to make inroads into an approximately 15 mn
Internet user base.

The government of India’s
excise and service tax portal has been slow on the uptake as far as
assesees are concerned.

Laments Sridhar, who as customs commissioner of Navasheva
port was instrumental in consolidating hardware and aggregating data across 33
collection stations, "E-filing is still hobbling along without too many
takers. The problem primarily lies in the mindset." Last year, DGSDM saw an
intake of over 1.50 lakhs customs and excise tax assesees, and only 30,000 of
them opted for the e-filing option. Of these, a mere 688 opted to file company
or individual returns from the comfort of their offices. Sridhar’s job will be
to see that every assessee does it.

S Balakrishnan, chairman, Indirect Taxes Committee,
Bangalore, Chamber of Commerce and Industry (BCIC) says that if major ERP
developers come up with stronger localization efforts a lot of implementation
problems could be tackled. "Software should be localized along with
e-filing applications online. Major companies should realize that legacy systems
need a lot of tweaking and online databases will have to be consolidated with
the rest of the ERP set-up. Our current data requirements require stronger ERP
apps support," says Balakrishnan. He adds, "On the other hand,
e-filing should pick up once broadband connectivity becomes ubiquitous. Right
now, we have been aiming to cut down the interface between government
departments and assesees to nil."

Glitch Combos
While ATM machine prototypes to collect electricity and water
bills have been in vogue for sometime now in the metros, online tax filing does
not enjoy the same real-time convenience. The automation of central excise and
service tax via e-filing interfaces has still not attracted mass assessee
appeal, bogged down as it is by a combination of ISP malfunctions, browser
incompatibilities, slow download times, Javascript and CGI errors and lack of
prompt communication channels. Users complain that response times from
government departments take weeks or are mostly ignored.

The Agent

For customs clearances, the
Indian Customs & Excise Gateway (ICEGATE) has been providing e-filing
facilities for exporters and customs house agents (icegate.gov.in) for the
past one year, with Bangalore and Chennai assessees being the quickest

Electronic Data Interchange
(EDI) messaging for regulatory agencies like DGFT, DGCIS and AEPC have
been optional via ICEGATE’s portal. A few airlines have already
commenced trials on EDI messaging to file their manifests through ICEGATE
at the Air Cargo Complex in New Delhi.

The Excise department
proposes to commence filing of export shipping bills through ICEGATE from
the Delhi Air Cargo Complex very soon. While online filing is yet to
become the norm for exporters of all backgrounds, the security issues are
being increasingly addressed by ICEGATE. "Creating a trading
partnership registration on the ICEGATE portal between the clearing
house/exporter and the customs house is now quick and easy. As for
transmission mechanisms, either secure SMTP or file upload options for
shipping bills and related documents can be done on ICEGATE," says RS
Sidhu, commissioner of Customs (Export), New Custom House, New Delhi.
Though currently in the trial period with no registration fee, ICEGATE
will charge for this service once the trial period is over.

Be it corporate assessees or
shipping houses, "data integrity issues still remain to be
addressed", says Sridhar. He is looking to ramp up his systems to
handle the combined assessee strength of 6,75,000 which will reach the 1
mn figure at the beginning of the FY 2007. "DGSDM will handle the
numbers and rising expectations of assesees on data management and
security through a strong Risk Management System." Over the last 18
months, the DGSDM’s vision of a consolidated EDI system has encompassed
a single, centralized hardware center — server cluster, LAN, storage-for
excise offices across the country. Data recovery procedures are also
planned, wherein a recovery site about 500 km away would ‘fall-back’
the EDI system to a business continuity centre in the event of a
catastrophe. The project, with both export and import modules built in, is
set to rollout by October next year.

While the revenue department
has been digitally maintaining a track record of importers by using fuzzy
logic algorithms to determine if a certain importer should be entertained
on the basis of his filing history, a complete online categorization
remains to be done. DGSDM also plans to take its Accredited Client Program-for
exporters who pay over Rs 1 crore in taxes -fully online. Couple that
with a pilot project next year to fully automate the central excise and
service tax system. Yet, the glitches remain. "The present e-filing
system for excise revenue monitoring has not lived up to our expectations.
Preserving data entry accuracy, data integrity and ensuring its
availability will be important," Sridhar reiterates. He has cause for
worry. "Right now, only 70-80% of excise assessee information is
available and accessible in our systems. In the case of service taxes, it
is a mere 20-25%. We will have to capture far more data online to
facilitate meaningful analysis and taxation."

Between the assessee’s
chair and the keyboard, it’s not all about mindset or data entry
accuracy. Some ER-1 assesses complain that even the mandatory
acknowledgement does not reach them after filing online. According to
Jayanthi Venkatesan, who files returns for a courier company,
"Acknowledgements are the only evidence that e-filing has been
accomplished. But the CGI-generated Web page often turns up with error
messages once I click the ‘Submit’ button."

In the face of such issues, DGSDM is
moving ahead full steam. A risk resolution module to be introduced by the
excise and customs department will feature full information on every
assessee, like defaults, showcause notices issued, provisional
assessments, and refunds. But that is still some way off. Turning the
system 360 degrees around for the assessee will be a test for maintaining
data integrity and accuracy as much as it will be in actualizing user

Ranging from the inability to add annexures, to coping with
ERP systems to attaching PDF files along with their returns, assesees opting for
Web filing have faced a host of problems. Take for instance, the larger
organizations, where an ‘SAP dump’ exercise-scouring hundreds of
applications across a large ERP set-up to produce annexures for every single
transaction the company has made during the filing period-becomes mandatory at
the time of filing their returns. Says an employee with an MNC database giant,
"ERP systems when conjoined with analytics software can produce plenty of
annexures. Most of these annexures pertain to service taxes, like the service
tax paid to different ISPs by any organization. There is no provision in the
e-filing system to attach these annexures even as PDF files, along with details
of our returns," he says.

With such snafus in store for e-filing, Sridhar wouldn’t
totally blame the assesses for giving their computer mice the cold shoulder.
"The fact is that our NIC server always ‘hangs’," Sridhar quips.
"I do agree that broadband connectivity is an issue with assesees. Where
transaction speed should be optimum not something which takes ages to download,
the assesees get fed up and decide to file their returns manually or through
floppies and CDs. It is a leviathan task to persuade them to file their returns
online instead of burning them to CDs, even if we assure them of data

However, Sridhar is optimistic that the connectivity speeds
will improve by next year, even as the government is pushing the accrual method
of accounting-online collection, consolidation and collation of data. Even a
CENVAT verification process online to capture sales invoices from over 1 lakh
assessees at the national level. "Of course, as of today, we are still
struggling to attract assessees to fill up even their ER-1 forms," Sridhar
says. "We would seek further involvement from assessees in filing returns

Rajesh Singh who filed returns online for a leading watch
company says, "Why blame assesees when the system seriously lacks options?
Who wouldn’t be turned off when even unit definition problems for goods are
not sorted out before being ported online? Often, the excise department’s
online database for ER-1 forms accepts import quantities to be filed only in
kilograms. The tariff directory does not even mention other units."
However, Sridhar counters the poor ‘data entry quality’ displayed by online
assesees. "We have noticed that assessees make too many mistakes when
entering unit quantity codes. Vigilance at their end while entering data would
help everybody."

While e-filing and e-payment will help industries and government
departments to focus more on business without unnecessary interactions and
paperwork and keeps costs of collection down, the lack of interface options with
ERP programs is galling, say officials. They feel that e-filing would become a
discernible trend if the government permits more banks to participate in the
Real-Time Gross Settlement (RTGS) to collect excise and service taxes on its

Ravi Menon

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