Shome calls for more LTUs to reduce litigation

There is need for more large taxpayer units (LTUs) in India to widen the tax base and reduce tax litigation, said Parthasarathi Shome, chairman, committee on General Anti-Avoidance Rules (GAAR), which was set up by the Prime Minister.

Addressing members of the PHD Chamber of Commerce and Industry, Shome said the onus for setting up infrastructure for LTUs was on large business houses. ''We must identify LTUs on the lines of international practices that would allow tax officials to look into their accounts, thus significantly lowering down tax litigation cases in the country,'' he added.

LTUs are being established in India in a phased manner by the government. Initially, they are being set up in the five large cities of Bangalore, Chennai, Delhi, Kolkata and Mumbai. LTUs are already functioning in Bangalore (since October 2006), Chennai (December 2007) and Mumbai (March 2008).

An LTU is a self-contained office to provide single window facilitation to taxpayers who pay direct and indirect taxes above a threshold limit. The unit deals with central excise / service tax / income tax / corporation tax issues of all units holding a single PAN. It also provides certain tangible advantages such as duty free movement of goods across the different units / premises of a PAN holder, transfer of credit amount from one such premise to the other; to ensure time bound disposal of refund claims and dispute settlements; and to follow single set of simple procedures for all units.

According to the ministry of finance, the underlying commitment of the LTU is to provide better service to the taxpayer through personalised attention, quality of service, transparency in transactions and cordial atmosphere.

Shome, who is also a professor at the Indian Council for Research on International Economic Relations (ICRIER), said the major challenge before the government was to move towards a better tax policy structure and tax administration. ''There is a large black economy in India, like while buying any property, a buyer is compelled to pay a large part in cash to a property dealer, which goes unaccounted,'' he said.

Besides changing tax laws, what is more important is complete structural reforms in tax administration in partnership with the organised private sector, added Shome. The ICRIER professor had helped in the formulation of the direct tax code and the goods and service tax.