Parliamentary panel urges sensitivity towards honest taxpayers

A Parliamentary report from the Standing Committee on Finance highlights the need for tax authorities to be more understanding of honest taxpayers facing inflated demands. The committee urged tax officials to gather feedback from the public to enhance the faceless assessment process. The report, submitted to the lower house, pointed out the issue of "fictitious tax demands" that misrepresent the actual tax arrears owed. The committee, led by Bhartruhari Mahtab of the Bharatiya Janata Party, expressed concern about the staggering total of Rs. 48.7 trillion in tax arrears, which includes Rs. 43 trillion from direct taxes and Rs. 5.65 trillion from indirect taxes. To tackle the issue, the committee called for a thorough review of the tax assessment system. They suggested possible measures such as writing off demands or imposing moratoriums on tax arrears to ease the situation for honest taxpayers. According to tax officials, challenges in recovering arrears often stem from difficulties in locating taxpayers or from legal stays on demands. The report also discussed issues with indirect taxes, noting that many parties are unable to pay due to financial troubles, while some have filed for bankruptcy. The committee recognized that the faceless tax assessment system, introduced in 2019, has improved compliance and reduced litigation, but identified the need for solutions to assist taxpayers struggling with online processes. Lastly, the committee recommended regular surveys to better understand the challenges taxpayers face in filing and assessments. While these recommendations are influential, they are not mandatory for the government to implement.