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Government of Karnataka

Government of Karnataka. Department of Commercial Taxes. Project Transformation Transforming the Commercial Tax Regime in Karnataka. Pradeep Singh Kharola ,. State Collects about Rs 37,000 Crores (6 billion USD)/year VAT and Sales Tax are the major components

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Government of Karnataka

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  1. Government of Karnataka Department of Commercial Taxes Project Transformation Transforming the Commercial Tax Regime in Karnataka Pradeep Singh Kharola,

  2. State Collects about Rs 37,000 Crores (6 billion USD)/year VAT and Sales Tax are the major components The Department has about 800 officers and about 6000 staff About 500,000 lakh dealers (traders) collect tax on behalf of government and remit it monthly. The Department has about 200 offices located all over the state. COMMERCIAL TAXES – The backbone of state finances

  3. It is an indirect tax and each sale transaction needs to be captured. The traders/dealers act as agents of government for tax collection. Each transaction shall be covered by a bill INDICATING TAX ELEMENT. The tax collected to be remitted monthly along with a summary of details – the return. The basics of sales tax/vat collection

  4. Commercial Taxes DepartmentBackbone of state’s finances but: • Outdated systems lead to pilferage and corruption. • Cost of compliance very heavy for tax payers – permissions, frequent visits, harassment • Paper based systems unable to cope with high volumes. • Emphasis on regulatory role and policing • Bogged down by routine work – no attention to analysis

  5. ‘Project Transformation’ TO FROM

  6. E - VARDAN THE FOUR PILLARS E - PAYMENT E - SUGAM E - VARADI Services at doorsteps A new Paradigm E - GRIEVANCE E - SUVEGA E - CST M - SUGAM ProjectTransformation E-reconcile Transparency and Accountability Policing by Citizens Comprehensive Assessment System E - GRAHAK E-enforcement system

  7. The registration process from filing of application to issue of certificate was made on line. • The Registration number and other details kept in public domain and paper certificate requirement dispensed with. Details accessible on the website, even through SMS • On an Average 5000+ online registrations are issued monthly Traders no longer have to visit tax offices- online registration (e-vardan) On an average each dealer had to visit the department about 10 times a month – about 150,000 lakh visits per day all put together.

  8. All traders enabled to file monthly returns electronically. Filing of erroneous returns ruled out. Filing not possible unless payment of tax is made. Achieved 100 % e-filing in 3 months of introduction of e-filing (July 2010) 415,000 Lakhs returns received every month Filing of returns is only online –e-varAdi

  9. Remittance by cheques was beset with difficulties • Trader had to come to the office • Cases of cheque bouncing • Holding on to cheques • Reconciliation virtually impossible • The remittance was made electronic (95% of collection comes through e-payment) • This was not merely ELECTRONIC PAYMENT. But a comprehensive remittance and reconciliation system integrating the department, the bank, the RBI and the Government treasury. • The RBI has recommended this system to all states. Traders NEED NOT COME TO OFFICE FOR REMITTING TAX- (E-Payment and e-reconciliation system)

  10. E-payment & E-Reconciliation PROCESS

  11. Some transactions which attract zero tax or concessional tax like sale for exports, stock transfers, interstate sale. The process of issue of these forms is beset with all traditional problems like speed money etc. All these declarations need to be verified physically – an impossible task given the volume – 2 lakh forms per month. Statutory forms – shifting from post declaration verification to pre-event confirmation • The tax liability shifts from the despatching dealer to the receiving dealer. The receiving dealer indemnifies the despatching dealer by giving him a declaration in a form. These forms are issued on stationary (having security features) by the tax offices. • Statutory Forms are • C Form • E1 Form • E2 Form • F Form • H Form • Delivery Note • Transit Pass • TDS Forms

  12. A system of electronic declaration and downloading of forms introduced. The trader receiving the consignment applies on line with all details of the transactions including about the selling trader. The tax office processes the information and permits the trader to download the form. The details of the form are kept in public domain for anyone to verify authenticity. No need for physical verification as the transaction gets debited to both the traders account. A system of one trader policing another PAPER BASED FORMS Substituted WITH ELECTRONIC DECLARATIONS.

  13. Commercial Taxes Department was the first to become fully Right to Services Act Compliant in the State. The success rate is --98% Most of the services like issue of ‘C’ form,Deliverynote,etc have been put on the automatic mode with no human intervention The trader submits the request online – the computer verifies the details with its database – if the information is correct a form with all details duly filled in is generated and the trader can download it. All services under the ‘right to services’ act All 5 Principles of Right to Services have been adopted Online information Online request Auto verification and approval On time Delivery Online Delivery

  14. E-sugam – a paradigm shift The birth of check post

  15. checkpost: A lose-lose-lose system

  16. Anytime any anywhere from parallel web-sites No need of printed form, SUGAM Number is sufficient. SUGAM generation through SMS. Average 25 Lakh SUGAM generated/month (One SUGAM/second) SOLUTION: A PARADIGM SHIFT • Earlier regime based on philosophy that dealer should use delivery note and Department’s entire effort was geared towards making dealer account the transaction in his/her books of accounts. • This paradigm sought to be reversed in – • e- Sugam – The dealer accounts the transactions first and only then can he/she despatch the goods. Before and after e-SUGAM

  17. Drawbacks of the Conventional System Assessment is basically verifying the truthfulness of the Returns with the books of accounts and other documents. It was totally opaque – nexus between the Assessment Officer and the trader. Pick and choose policy existed – as only 3 to 5% of traders were assessed. If the officer and the dealer colluded, the order just remained on file and the State suffered. Malpractices like passing orders after the officer was transferred or had retired were prevalent. COMPREHENSIVE ASSESSMENT SYSTEM- THE GAME CHANGER

  18. Assignment of cases through central computer system. The cases to be picked up based on objective algorithm Orders to be digitised on the system and a unique number generated. Each order allotted to another officer for peer review. All revisions and appeal orders are digitised and linked to the original order. Tracking of cases is possible. All malpractices such as ghost writers have disappeared. The demand gets generated automatically, once order is digitised and collection is tracked Knowledge Bank of orders created The comprehensive assessment system – breaking the nexus

  19. Guaranteed Response Against Hidden Activities in Karnataka The basic element of sales tax collection is that a bill has to be issued for each instance or sale/purchase. Unless consumers insist for bills a seller may not issue a bill. A genuine consumer has no recourse when a bill is not issued. Some consumers do file written complaints but no significant outcome is achieved. Involving citizens – e-grahak

  20. Citizens makes Complaints through SMS Commercial Taxes Web-site Control Room verifies & contacts Citizen Mobile Officer inspects the shop 1 Mobile officer gets SMS Citizen sends SMS Complaint 2 5 4 3 Action details to Citizen Informs the mobile officer 6

  21. How it was achieved

  22. Business Process Re-engineering

  23. Technology intervention • Web based system for 4,50,000 + dealers. • CTDWAN for networking 2000 systems located in 200 offices/check posts. • Integrated with SMS gateway of NIC. • A control room, working 24X7, has been established. • The software development by an in-house team of NIC.

  24. ENVIRONMENT BUILDING – WINNING OVER THE DEALERS • Interactive meets with trade bodies to introduce the concept. • Main selling point – dealers no longer required to come to tax offices and trucks would get instantaneous clearance at checkposts. • On ground success seen when different trade bodies started competing with each other to organize training programmes. Department just provided the resource personnel. • More than 5 lakhs + dealers educated

  25. capacity BUILDING – eNABLING THE OFFICERS AND OFFICIALS • All officers/officials imparted week long mandatory training on E-governance initiatives and basic Computer skills. • Administrative Training Institute and District Training Institutes used. • Training programme was completely hands on, with Trainers selected from the department. • 6000+ officers and Officials trained

  26. e-payment • Addl. SUGAM wed-site • SUGAM for all • Rules Amendment • CTD-SWAN establishment • e-returns • Capacity Building • De-designing of Web-site • Addl. SUGAM wed-site • e-registration • m-Sugam • e-reconciliation • e-Transit Pass • e-CAS • Capacity Building for Officials • Pilot of SUGAM • Pilot of e-CST • e-CST for all • CHECKPOST Computerisation- • CTD-SWAN sanction • Online delivery of e-CST • Environment Building • e-Clearance • Rights To Services • Scope of SUGAM extended • e-DCB • e-Grievance • e-enforcement • E-Return, e-pap 2012 2013 2009 2010 2011

  27. THE OUTCOMES - 1

  28. THE OUTCOMES - 2

  29. THE UNIQUE FEATURES – Reasons for Success

  30. Impact Assessment of e-Governance Initiatives by Ernst and Young

  31. REPLICABILITY

  32. The biggest challengeS

  33. THANK YOU

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