Five years ago, thirty percent of truckers who crossed into Punjab didn’t own up to what they were carrying. Through kickbacks, connections and blatant intimidation, these tough boys of the interstate got away with under-invoicing their cargo and sometimes not registering their loads at all. Its down-the-river effects, in terms of sales tax (now VAT), cost the government around Rs 700 crore a year.
The government realized it was time to get strict and smart. Instead of going after freight haulers and other defaulters in an ad hoc manner, it rolled out COSTIS (Computerization of Sales Tax Sales Information System).
The idea behind COTIS was to plug tax evasion, enhance the collection of revenues, bring efficiency to tax collection and provide better services to tax payers. Putting COSTIS in place cost the department Rs 50 crore. But the system got them back Rs 174 crore in the next three months. It’s ROI unheard of in e-governance, making COSTIS the poster child of successful e-government projects.
The 21 districts of Punjab are home to about 156,000 registered businesses, dubbed ‘dealers’ by the tax department. These establishments contribute Rs 5,000 crore a year to the state’s exchequer in tax (payments are made on a quarterly basis).
Wheeler Dealers
Manually handling this large a number of dealers led to loopholes, which unscrupulous dealers were quick to exploit. D.P. Reddy, commissioner, excise and taxation, Government of Punjab woke up every morning with new cases of dealers making transactions unaccounted for. His department found bills in the name of non-existent dealers and even those with fabricated consigner and consignee names. “The manual regime provided a safe haven for tax evaders,” says Reddy. The government knew that about 30 percent of dealers weren’t paying their taxes but could do little about it.
Additionally, the absence of on-tap information meant that the tax department could not track dealers who had filed their returns on time. The law laid heavy penalties on defaulters – another revenue channel the manual system did not permit the government to mine.
But like many e-government projects, COSTIS had its fair share of inertia. Though the project was conceived in the 1990’s, it hobbled along for close to a decade. Transparency, an additional benefit of COSTIS, was neded but a lack of political will slowed the project. That was how the system remained till someone did the math and figured the extent to which defaulters were defrauding the government.
Speedy Recovery
ETTSA (Excise & Taxation Technical Service Agency) was then quickly formed. “It took us just under two years to streamline work and put the initial processes in place,” relives Reddy.
Led by H.M.S. Rosha, ETTSA’s CEO, the agency pieced together a plan to computerize ICCs (Information Collection Centers) located at all 36 interstate border barricades. Putting ICC data on stream was the next challenge. Their most daunting task, however, was creating and running a Sales Tax Information System online. This was crucial since information was only useful in the hands of the people who monitored and tallied what was coming in with sales tax dues.
But no sooner had the Sales Tax Information System been deployed, that the Union Government introduced VAT. Transitioning from a sales tax regime with a single tax applied at point-of-sale to VAT where various taxes were collected at each stage of manufacture, unnerved many. But the move had to be made and it had to be done quickly before the project lost the support it had garnered.
COVIS (Computerization of VAT Information System) was introduced and implemented in a phased manner. First, the gateways into Punjab – the 36 ICCs - which provided information about consignments that were going in and out of the state, were digitized and wired into a central sever, located in Patiala. Simultaneously, ETTSA also connected 10 out of the 21 district offices. The second and the third phases will connect the other districts and build a Disaster Recovery Site at New Delhi.
The project joined 100 remote locations (46 via VSAT). COVIS was now piping active information to the desktops of 825 sales tax enforcers.
Online VAT was the department’s gift from Santa, almost literally. Within the first quarter COVIS sponged up Rs 174 crore. The government saw a 25 percent increase in revenue straightaway, almost all of it from defaulters.
COVIS incorporates an Audit and Investigation module that intelligently isolates tax-payers suspected of forging their returns. The system also lists dealers, providing their contact information and the status of their quarterly filings.
Two-way Street
Six thousand repeat defaulters lost their licenses soon after COVIS was launched. This made many regard COVIS as predatory, and focused on ensnaring dealers. But COVIS also brought justice to the system.
Putting the contents and status of tax-related case online, the Appeals and Revision module unclogs bureaucratic channels. It increased dealer confidence about receiving justice from the bench. “The aim was to shift to a paperless approach and provide a transparent process to the citizens of Punjab,” says Rosha.
Among the most important contributions of COVIS is a module that captures information of goods that come into the state. “Especially under VAT, we need to know what goods are crossing the state line, because we need to levy tax on these commodities,” explains Rosha.
Another advantage COVIS offers is swifter dissemination of information. It took months to react to information presented by ICCs. Now, information can be retrieved and analyzed at the click of a mouse. “We know the amount of export and import each dealer makes daily. Even inter-dealer trading information is available. Cross-checking filed returns with information provided by ICCs is now instantaneous,” says Rosha.
The streamlining of COVIS helped straighten the shoulders of many over-worked tax officers. The number of defaulters at large and of tax applications in the pipeline were placed on a grid and monitored. Just this act brought down application turnaround from a year to 60 days.
Graft Decelerates
The upshot of this is the downfall of corruption. “We have taken away as much discretion as possible from officials. They once had the discretion to impose penalties ranging from 10 to 150 percent. The system has slotted penalties and given people access to information,” says Rosha.
But what’s really gaining people’s goodwill is the refund module. “If we don’t pay out a refund in 60 days, we promise to pay interest on the refund amount. If we expect the tax payer to shell out interest on late submissions, he has the right to expect interest from us too,” says Reddy.
ETTSA’s success has led to a plan to introduce 500 ‘Bikri Kar Seva centers’ at high-traffic areas in major towns. These kiosks will bring tax-filing to a citizen’s doorstep.
The kiosks will offer services ranging from filing of returns, submission of applications for registrations and refunds to issuing statutory forms. “We will also enable payment of taxes, penalty, and interest through these kiosks,” says Reddy.
The department is currently pushing to web-enable ICCs. In the future, dealers will be able to give the ICC a heads-up of their trucks’ cargo, arm themselves with a VAT 36 form and save time.
Rosha’s is going all out with COVIS to shorten the queues at Punjab’s border, while keeping a look out for those who try to sneak across. Note to lorry drivers: Beware. COVIS is watching.
Autor: Rahul Neel Mani
Quelle: CIO India, 27.01.2006
