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Modi govt's revenue collection zeal backfires as IRS babus revolt

Neeraj Thakur | Updated on: 10 February 2017, 1:48 IST

Who would have imagined that a hardliner government with a head like Narendra Modi will face mutiny from government officials?

A group of Indian Revenue Service Officers (IRS) has revolted against the department of revenue that comes under the Ministry of Finance.

Also read:Bringing back black money: Narendra Modi's mission impossible?

The IRSA, Mumbai, had in its resolution said that the authority exercised by the revenue department was not in consonance with the Government of India, allocation of business rules, 1961 and hence devoid of any legal backing.

The case is related to action taken against a Mumbai based IRS officer for allegedly using unfair means to meet a revenue collection target.

The officer in question had raised a demand of Rs 10,000 crore against SBI on

30 March, 2016

. The lender had to pay Rs 4,900 crore in advance tax but the officer took only Rs 1,200 crore into consideration and slapped an interest of Rs 5,800 crore for short payment.

The officer did this only to meet his tax collection targets on the second last day of the financial year.

A rectification order was passed by the officer on

1 April 2016

(which falls in the next financial year) and a refund of Rs 9,500 crore was made to SBI.

What do the tax officers say?

An IRS officer on the condition of anonymity said "Our targets are set by the department of revenue. We are pulled up for not meeting the targets. Who is responsible for setting high targets"? The officer asked.

Also read: Modi govt's black money amnesty scheme a spectacular flop

The government managed to surpass the total tax collection target for 2015-16 by Rs 5,000 crore at Rs 14.60 lakh crore. If we believe the officer quoted above, a large amount of money is achieved through such practices.

Govt surpassed its revenue collection target by Rs 5,000 crore at Rs 14.6 lakh crore

The Modi government has sought to clamp down on what it described as "tax terrorism", which results in unfair in tax demands on companies.

What would be the impact of this turf war?

The government has issued a strong statement against the resolution passed by the Indian Revenue Service Association's Mumbai against the revenue department,terming it as "insubordination". But the issue is not going to die soon as the rift between two government departments and will lead to bad blood between government officials.

The Modi government is trying to increase its revenue by forcing tax evaders to declare their undeclared wealth. This is important for the government to meet its promise of curbing the black money economy in the country. The Finance Minister as well as the Prime Minister have issued strong statements against those who have failed to declare their undeclared assets under the two amnesty schemes.

But with the IRS officers turning against the department of revenue, it would be difficult for the government to take any action against tax defaulters.

Also, angry tax officers can lead to the government falling short of their yearly revenue collection targets.

Given that this is an unprecedented revolt by one of the most important departments of the government from the perspective of revenue collection, the government will have to step cautiously, lest it faces dire consequences.


Also read: Two years, five reports: how Modi's SIT on black money is fooling India

First published: 30 July 2016, 10:08 IST
Neeraj Thakur @neerajthakur2

As a financial journalist, his interface with the two dominant 'isms'- Marxism and Capitalism- has made him realise that an ideal economic order of the world would lie somewhere between the two.

Senior Assistant Editor at Catch, Neeraj writes on everything related to business and the economy.

He has been associated with Businessworld, DNA and Business Standard in the past.

When not thinking about stories, he is busy playing with his pet dog, watching old Hindi movies or searching through the Vividh Bharti station on his Philips radio transistor.