Implementation of the Kerala Value Added Tax Information System (KVATIS) has helped the State Commercial Taxes Department to ensure better tax compliance and earn higher tax income, a study conducted by Ernst & Young, the international auditing firm, has said.
The study has found that KVATIS, a unique e-governance initiative in the country, has helped the department to reduce the gap between the expected and actual number of returns filed and to bring down the percentage of offline payments over the last two years. Simultaneously, there has been a tremendous increase in online payments and related transactions. The extent of e-payments currently is about 99 per cent, the remaining offline payments being compounding fees, payments against assessment, new registration charges, security deposits, etc.
Ernst and Young had conducted the impact assessment study of KVATIS, which has been under implementation over the last two years on Kerala State Wide Area Network (K-SWAN), using quantitative and qualitative parameters and inputs from internal and external service beneficiaries of the project, namely the dealers, tax practitioners and employees of the department. The random sample selected by the firm comprised 128 dealers, 156 tax practitioners and 200 employees. The report was submitted to the government on December 13.
The new information system, the Ernst and Young report says, has enabled substantial data capture of all inter-State transactions. The study puts compounded annual growth in inter-State transactions at 143 per cent and the compounded annual growth of the tax revenue collection at 17 per cent over the last four years. The increase in tax collection during the period was despite the economic downturn and the increased base for each year. The compounded annual growth rate of tax base, according to the study, was 40 per cent over the last four years.
There has been a drastic reduction in the number of taxpayers availing the help of third party agents and a 27 per cent reduction in the use of Akshaya Kendras for filing returns. According to the study, there has been more than 85 per cent increase in the revenue collected per employee and a 21.3 per cent increase in number of files scrutinised by the employees after the advent of KVATIS and the department was able to realise more revenue by increasing the productivity of the employees.
Quality of work has improved with automation of transactional tasks and the valuable time of the employees can now be directed to more productive means like data mining and other analysis like input tax credit/output tax credit, etc., which can be used to augment the revenue collection and curb evasion, the report says.
Morale up
More than 90 per cent of employees expressed an increase in their morale and esteem and attributed this to office automation and introduction of ICT. The workload of employees on less productive functionalities like maintaining voluminous registers and tedious job of reconciliation have come down tremendously giving ample time for effective verification and scrutiny of the files, thus enhancing tax compliance. Employees have reported considerable increase in workload mainly related to extent of scrutiny and the increase in tax base. The coverage of scrutiny has increased from 1 in 5 to 4 in 5, ie., the effectiveness of scrutiny has quadrupled over the last four years from 20 per cent to 80 per cent.
There has been a 50 per cent reduction in the number of visits made by the tax payer to any of the nearby commercial tax office and 80 to 90 per cent of the taxpayers and tax practitioners feel that access to statutory forms has made the process easy as they no longer had to visit departmental offices to avail the same.
There has been considerable reduction in the economic cost of transaction with the advent of KVATIS. Despite all these advantages, the investment in hardware, software and networking activities has been considerably low (0.05 per cent) vis-a-vis the amount of revenue collected by the department.
(THE HINDU)
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