1st Internal Assessment

Principle of Taxation Law

NAME: MERWIN EMMANUEL RICHARD

COURSE: B.B.A. LLB

SEMSESTER: 7th Semester

DIVISION: C

PRN: 19010126271

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 HOW TO BRING TRANSPARENCY IN TAXATION SYSTEM IN INDIA?

Understanding of the Problem & Issues

Taxes are a crucial part of income for the government. The taxes are imposed on the people and
organizations on several things of the normal day-to-day course of routine. These taxes are
important for the government of India because of the income received from these the government
can invest or spend on things like public facilities like building bridges and government
buildings which are constructed for the aid of the public and for settling public affairs of the
nation. The taxation structure in India is a well-organized and convenient form of the body where
it is divided into three parts the central government, the state government, and the local
municipal bodies. Each body is responsible for collecting certain types of taxes. There are two
types of taxes that are levied upon the public which are direct taxes which include income tax
and indirect taxes which include value-added tax. The taxation system however well-structured
does have certain loopholes and drawbacks, as it includes tax evasion, bank secrecy, ineffective
database, the complexity of the tax system, unaccounted money, etc. There is a need to make
sure that the tax system is transparent and visible to the public as to what is going on in the
internal matters of the tax system in India. The reason being why transparency in taxation is
important because it helps to build trust and security between the taxpayers and the concerned
authorities to which the tax is being paid, it also helps the stakeholders to have a better
knowledge of understanding of their business and strengthens the tax governance and in overall
helps to improve the overall economic condition of the country. This research paper discusses
what steps ought to be taken or whether policies and precautions have been already taken to
ensure that the tax system in India is transparent as well as an efficient and effective in its system
as a whole.

Literature Review

S. No Particulars Review

1. Nishant Ghuge, Indian Tax The only data used in this study are
Structure: An Analytical secondary sources. The various Indian
Perspective government websites yield a variety of

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 figures which are used in this research.
2. Pratap Singh, Tax Revenue in The tax system in India has a brief history
India, Trends & Issues that is followed by a discussion of various
trends from 1980 to 2017.The author
receives assistance from this paper in
arriving at the effective recommendations
and conclusion for this research paper.
3. Sherawat, M., & Dhanda, U., GST The paper talks about the benefits and
in India: A key tax reform. difficulties that India faces in
International Journal of Research implementing GST the subject of this
Granthaalaya, 3 (12), 133-41, 2015. study. They came to the conclusion that
the Indian economy needed a tax system
that was clear and simple. They outlined
the various benefits and stated that the
GST will provide India with a world-class
tax structure and a streamlined tax system,
but that this will depend on how well it is
implemented.
4. Kumat H. (2014). Taxation Laws of The author of this research paper talks
India- An Overview and Fiscal about the overview of the Indian tax
Analysis 2013-14. Indian Journal of system and potential obstacles. He
Applied Research, Vol. 4(9), pp. 82- believes that there ought to be a system of
84. coordinated consumption taxes.
Additionally, he asserts that increasing the
efficiency of India's tax system remains a
significant obstacle.

Analysis

The tax structure system in India is in a need of a transparent manner and efficient way of
functioning. Several changes need to take place for the smooth functioning of the tax system.

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According to research, taxpayers pay less to fulfil their tax obligations when the tax system is
simpler, and the tax administration is more transparent. (Torgler & Schneider). Transparency in
the tax system help in proper functioning and ease of global cooperation among other countries
about the tax system and also helps in putting an end to several wrongs such as bank secrecy and
tax evasion.

The tax system in India is facing a major struggle and is in a need of change as the faceless
assessments of cases selected through notices issued in October 2019 are expected to be
completed by the tax department by halfway through September 2020. The audited population is
quite small because less than 0.26% of tax files are selected for audit and less than 4.18 percent
of the population files tax returns. A similar framework for appeals was announced for
implementation on September 25, 2020, just like for faceless evaluation. There have been
numerous instances of high-pitched tax assessments in India's tax system. This behaviour is
frequently attributed to the annual tax collection targets that field inspectors must meet. The
result is an appeals process that is overworked and takes a long time, and the tax department has
had a success rate of less than 30%. The overall result is a lot of effort and suffering for little in
the way of revenue generation. The ongoing reforms are intended to reduce tax litigation
holistically. If the multi-level audit process removes the burden of tax collection on field
inspectors, the structural reforms necessary for effective tax administration will take place.
Modern technologies can also prove to be of an essential role in bringing transparency to the
taxation system by saving time and cost.

A recent initiative called 'Transparent Taxation – Honouring the Honest' has been organized by
our Honourable Prime Minister Narendra Modi, to combat the problem of tax transparency. The
main objective of the initiative of this platform is to move on from a tax-terrorism country to a
tax transparency country overall. To make sure that the honest taxpayers are given their
recognition and the defaulters are dealt with. The platform aims to ensure that the mentality of
the tax administration is focused on a better change in serving people. The platform also aims to
make sure that there is a strong connection between taxpayers and the tax collectors so that the
taxpayers will have no hesitation while paying taxes or contacting any queries related to tax to
the concerned administration. The rights and responsibilities of the taxpayers have also been
mentioned and codified under this initiative providing transparency and trust.

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The dispute redressal mechanism has been dealt with and necessary changes are being
undertaken to ensure its smooth process as well as the refund process to the taxpayers. Several
rules and procedures have also been eased under this platform to ensure ease for individuals and
organizations paying taxes. Some of these are the reduction of the corporate tax rate from 30
percent to 22 percent and also the elimination of this payment of tax for existing companies. The
initiative also provides leniency to those taxpayers earning Rs. 5 Lakhs or less from paying taxes
which helps in saving time and cost of those. The payment of distribution tax has also been
eliminated from society to encourage investment in the equity market. The initiative has also
made the tax department only entertain those cases of appeal which is in the range of Rs. 50
Lakh and 2 Crore. These steps which are undertaken overall in this initiative will prove to be of
great relief of stress for the people and the organization as well as also for its smooth function
and transparency.

The Supreme Court's decision in Shiv Raj Gupta v. CIT (CTO (1985) 3 SCC 230) talks about and
emphasizes Adam Smith's tax law canon and aims to convince the government that "it is the
responsibility of the regime to design a tax system for which a subject can budget and plan. "The
Supreme Court has repeatedly urged the government to balance taxpayer benefits so that
"unnecessary litigation can be avoided without compromising revenue generation,"

The way to move forward for India regarding the tax system is to digitalize the activities such as
digitizing the filing of returns, payment of taxes, submission of grievances, reporting of tax
transactions, and tracking and requesting tax refunds. The current struggles of India to
restructure its tax system and its technology initiatives to achieve a completely automated data
exchange and assessment should eventually eliminate the need for compliance, as accomplished
with its Making Tax Digital initiative. Taxpayers are also required to assess their organization's
readiness to respond to the growing digitization of the tax system as a result of these
developments.

Opinion and Suggestions

As we can see from the above-mentioned facts and in-depth analysis of the tax system in India.
We can notice that there is a lot of corruption and illegal tax activities such as tax evasion
happening in the country and therefore there is a need for improving the transparency and

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accountability within the tax system of India. For improving transparency, steps ought to be
taken and ensured for the same. There is a need for spreading awareness among the taxpayers
about the importance of paying taxes and the penalties involved for the same. These awareness
steps can be taken in the form of campaigns or seminars or through online platforms. Steps can
also be taken to provide relief to the huge amount of taxpayers where most cases of tax fraud
happen. The concerned authorities can also help strengthen anti-corruption policies. Penalties
can also be imposed for the defaulter of the tax payment by huge penalties or imprisonment
depending on how serious the crime is. The government can also provide certain friendly
schemes for the regular taxpayers which helps in building trust and in turn, helps the regular
payment of taxes. Steps can also be taken to reduce the tax rate and provide a well-designed way
or a platform for tax collection or payment. The tax authorities should be independent and not be
influenced by bad politics and the tax and audit collection ought to be updated and kept up to
date to ensure transparency in the tax system. Digitalized mode of tax payment can also be
encouraged as it has been up and coming because of its ease and convenience. The data is easily
stored and provide analytics for the same with a click of a button. This helps to save time and
operate efficiently for both the taxpayers and the tax administration. For example, the Union
Bank of India provides an option of tax payment on the mobile app where the person can make
direct payments of direct and indirect taxes. This helps the government by not only receiving the
payment of taxes on time but also helps the authorities to help control black money as the
transactions are digitalized the government can keep a track of what is going on in the long run
and also helps to provide a boost to the economic condition of the country as the printing of
notes would be on a decline.

References
1) Why tax transparency report enhances value - The Hindu Business Line
2) Transparent taxation: Why India needs an efficient tax system - Business Today
3) Narendra Modi: India has moved from tax terrorism to tax transparency: PM Modi - The
Economic Times (indiatimes.com)
4) How to create a system for fair and transparent taxation in the digital age Primary tabs
(worldbank.org)
5) https://www.scconline.com/blog/post/2021/10/01/supreme-court-emphasises-on-
simplification-of-tax-law/

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 6) Shiv Raj Gupta v. CIT (CTO (1985) 3 SCC 230)
7) Nishant Ghuge, Indian Tax Structure: An Analytical Perspective
8) Pratap Singh, Tax Revenue in India, Trends & Issues
9) Sherawat, M., & Dhanda, U., GST in India: A key tax reform. International Journal of
Research Granthaalaya, 3 (12), 133-41, 2015.
10) Kumat H. (2014). Taxation Laws of India- An Overview and Fiscal Analysis 2013-14.
Indian Journal of Applied Research, Vol. 4(9), pp. 82-84.

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