LARGE TAX PAYER UNIT

[Mr. M. GOVINDARAJAN]

A number of tax administrations in the world have established special systems to administer their large tax payers.  Several OECD countries introduced special tax audit operations for large operations in the 1950s and 1960s.  A more recent trend has been to set up full fledged large tax payer units that are responsible for most tax administration functions relating to such tax payers including collection, enforcement of tax arrears and audit. 

Large Taxpayers Unit (‘LUT’ for short) is a self-contained office to provide single window facilitation to taxpayers who pay direct and indirect taxes above a threshold limit.   In Asia 13 countries have established LTUs at different points of time, including Pakistan, Sri Lanka, Bangladesh and Nepal.  Following the international practice India introduced LTU which would act as a single window facilitation centre for all large entities paying excise duty, corporate tax/income tax and service tax 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 premises to other); to ensure time bound disposal of refund claims and dispute settlements; and to follow single set of simple procedures for all units. 

The underlying commitment is of providing better service to the taxpayer, through personalized attention, quality of service, transparency in transactions and cordial atmosphere.  This will reduce tax compliance cost, reduce delays and ensure uniformity in the matters of tax/ duty determination.   Eligible tax payers may opt to avail the facility of assessment under LTU, which would especially beneficial to those taxpayers with multi locational operations.   They can able to file their excise return, direct taxes returns and service tax return at such LTUs and for all practical purposes will be assessed to all these taxes there under.  These units are being equipped with modern facilities and trained manpower to assist the tax payers in all matters relating direct and indirect tax/duty payments, filing of documents and returns, claim of rebates/refunds, settlement of disputes etc.,

LTUs are functioning at Chennai, Bengaluru, Mumbai, Kolkata and Delhi.

Large Taxpayer

Rule 2(ea) of Central Excise Rules, 2002 defines the term ‘large taxpayer’ as a person who-

• has one or more registered premises under the Central Excise Act, 1944;
• has one or more registered premises under Chapter V of the Finance Act, 1994

and is an assessee under the Income Tax Act, 1961 (43 of 1961), who holds a Permanent Account Number issued under section 139A of the said Act, and satisfies the conditions and observes the procedures as notified by the Central Government in this regard.

Eligibility

Every tax payer, who is having single PAN based entity-

• Who is presently assessed to income tax/corporation tax under the Income Tax Act, 1961, in any of the cities Bangalore, Chennai, Delhi or Mumbai; and
• Who has paid during the financial year 2004 – 05-

• Excise duty in cash of ₹ 5 crore or more; or
• Service tax in cash of ₹ 5 crore or more; or
• Advance (income) tax/corporation tax of ₹ 10 crore or more

is an eligible taxpayer for the purposes of being served by the LTU.

Benefits

The following are the benefits/facilities are extended to large tax payer units-

• A large taxpayer (single PAN-based entity) can file all his direct taxes, excise and service tax returns at a single place, irrespective of the geographical location of their units.
•  All other documents, correspondence, intimations such as export / import related central excise documents, bonds, proof of exports, etc. pertaining to all these establishment can be filed with LTUs.
• To begin with, the returns of the company and its units can be filed electronically and the payment of tax/duty can be made electronically. Gradually, these units would be provided with required software and infrastructure so that other documentations, such as filing of rebate/ refund claims, filing of intimations or permission, reply to notices can also be done electronically.
• Digital signature certificates can be issued on request by the Department, free-of-charge, to facilitate electronic transaction. There would be no requirement for filing a parallel paper document.
• Upon joining the LTU, an officer of the level of Assistant / Deputy / Joint / Additional Commissioner would be appointed as ‘client executive’ for each taxpayer. The taxpayer can remain in touch with the client executive for assistance in any/all tax matters (for example for returns filing, classification issues, intimation matters relating to refund/rebate, exports, other claims, etc). This would ensure that the taxpayer need not interact with different section / officers of the LTU.
• Once a taxpayer opts for the scheme, the erstwhile jurisdictional field officers (including preventive units of the erstwhile Excise Commissionerates) would not suo motu visit its units or interact with them for any issues arising. However certain procedures under the Central Excise Rules, requiring physical control, and verification of premises or documents, would be carried out by the local Commissioniorates under the express directions of the LTU. Further, in respect of excise and service tax matters, on-going investigation, appeals, provisional assessments that had commenced prior to the large taxpayer opting for LTU would continue to be with the erstwhile jurisdictional Commissionerate.
• Cases, where show cause / demand notices have been issued by the erstwhile jurisdictional officers but not adjudicated, would stand transferred to LTU and the same would be adjudicated by officers posted at LTU. All pending matters with the jurisdictional Commisionerates of Income-tax, other than those with CIT (Appeals)  would stand transferred to the LTU.
• The taxpayer would have the option to transfer any excess CENVAT credit (of central excise duty or service tax) accumulated in one manufacturing unit or service providing unit to any other eligible unit of his choice through a simple mechanism. Necessary changes in the CENVAT Credit Rule, 2004 are being made.
• The taxpayer would have the facility of removing capital goods and inputs from one unit to any other unit of its choice, without payment of duty / reversal of credit through a simple method. Similarly the finished product of one unit can be transferred to another unit, without payment of duty, provided the second unit uses the products as inputs and pays excise duty on the finished goods manufactured using such inputs.
• The taxpayers would not be subjected to mandatory audit. The selection of a taxpayer for audit would be based on ‘risk assessment’. The Department would ensure that audit schedules are drawn in consultation with the taxpayers so as to cause minimum inconvenience.
• The taxpayers would do self-sealing in case of all exports. In order to ensure that there is no delay in examination and sealing by the officer, the requirement of examination / sealing by the officers at the units of taxpayer is dispensed with.
• It would be ensured that there is uniformity in the practice as regards classification, valuation, credit availment and similar other issues, for various units of a taxpayer. Trade notices will be issued centrally by the LTU.
• The rebate / refund claims would be disposed off within 30 days of their filing, if the claims filed are in order.
• With respect to income-tax specifically, facilities would be provided for on-line submission of returns, e-payment of taxes, electronic credit of income-tax refunds, and on-line filing of grievances and appeals.

Procedure

• An eligible large taxpayer would submit ‘Consent Form’while opting for LTU. The Consent Form may be sent to the Dy. Secretary, Central Board of Direct Taxes, Ministry of Finance, Room No. 243-F, North Block,New Delhi or faxed at 011-2309 3902. The Form can also be e-mailed at ltu@incometaxindia.gov.in. On acceptance of the Consent Form, the taxpayer shall be issued a LTU membership number by the concerned LTU;
• No new registration would be required.However, in case a new factory/service provider/registered dealer comes up after the taxpayer has opted for LTU scheme, new registration has to be taken from the LTU;
• Facility for payment of the three taxes through the internet would be provided in the LTUs.The excise duty/service tax payable would be paid by the taxpayer separately for individual units.The taxpayer would, however, have the option to transfer any excess CENVAT credit accumulated in one manufacturing unit or service providing unit to any other eligible units would have to be suitably adjusted by the respective unit.In case duty/service tax is paid in excess of the amount due, the tax payer can adjust it against his future tax/duty payments.For this purpose he shall take credit of the excess tax/duty as if the same was tax/duty paid on inputs, capital goods or input services.However, these adjustments would be allowed only under the same accounting head.In case a tax payer wants to transfer inputs, capital goods or finished goods from one of his units to another, the same can be done without payment of duty on a challan.Both the units would have to maintain records showing receipt and dispatch;
• The rebate/refund claims would be disposed off within 30 days of their filing, if the claims filed are in order.In respect of income tax, facility for direct credit of refunds to the bank account of tax payers would be made available;
• The unit wise audit shall be conducted by the LTU.While there would be no ‘mandatory’ audit, case selection for audit would be based on ‘risk assessment’ and made in consultation with the taxpayers so as to cause minimum inconvenience.Cases for scrutiny under the Income Tax Act, will be similarly picked up on the basis of scientific risk management procedure;
• In respect of direct taxes, all appeals presently pending with the CIT(Appeals) would be heard and disposed by them. All future appeals would be lie with the CIT (Appeals) in the LTUs. Facilities for on-line filing of appeals will also be provided;
•  In respect of central excise/service tax matters, in cases where show cause/demand notices have been issued by the erstwhile jurisdictional officers, but not adjudicated, would stand transferred to LTU and the same would be adjudicated by officers posted at LTU. The process of adjudication would be completed within 3 months of the issuance of the notice, wherever possible. The erstwhile jurisdictional Commissioner (Appeals) would adjudicate the appeals pending with them. However, all future appeals would be filed with Commissioner (Appeals), LTU. In case any duty/tax has been short paid and a notice has to be issued for its recovery, the LTU would first inform the tax payer about his liability before issuance of any demand notice. In case the taxpayer pays up the duty/tax/interest within a period of 15 days from such intimation, no notice would be issued;
• All other documents, correspondence intimations such as export / import related central excise documents, bonds, proof of exports etc pertaining to all these establishment can be filed with LTUs. The taxpayers would be eligible for self-sealing in case of exports. In order to ensure that there is no delay in examination and sealing by the officer, the requirement of examination / sealing by the officers at the units of taxpayer is dispensed with;
• The jurisdiction of over the TDS returns would shift from the local Commissionerates to the LTU;
• In case of any procedure or difficulties which do not have revenue implications, the Chief Commissioner-in-charge of LTU can prescribe procedures, methods or relaxations to facilitate tax compliance by the tax payer.

Service tax provisions

Rule 6 of Service Tax Rules, 1994 inserts Rule 10 vide Notification No.28/2006, dated 30.09.2006 with effect from 30.09.2006.  The said Rule provides that-

•  A large taxpayer shall submit the returns, as prescribed under these rules, for each of the registered premises;
• A large taxpayer, who has obtained a centralized registration under sub rule (2) of rule 4, shall submit a consolidated return for all such premises.
• A large taxpayer, on demand, may be required to make available the financial, stores and CENVAT credit records in electronic media, such as, compact disc or tape for the purposes of carrying out any scrutiny and verification, as may be necessary.
•  A large taxpayer may, with intimation of at least thirty days in advance, opt out to be a large taxpayer from the first day of the following financial year.
• Any notice issued but not adjudged by any of the Central Excise officer administering the Act or rules made there under immediately before the date of grant of acceptance by the Chief Commissioner of Central Excise, Large Taxpayer Unit, shall be deemed to have been issued by Central Excise officers of the said unit.
• Provisions of these rules, in so far as they are not inconsistent with the provisions of this rule shall mutatis mutandis apply in case of a large taxpayer.

LTU in GST regime

The LTU is most beneficial to the assessees those who are having wide area in activities.  Whether the LTU concept will continue in GST regime?   There is no indication in the Bills recently passed by Lok Sabha and Rajya Sabha about the continuation of the LTU in GST regime.  There are various opinions prevailing about the successful functioning of LTUs.  But there is no doubt on The LTU scheme was announced to bring some relief for large taxpayers by providing them administrative convenience and other fiscal benefits. 

Sumit Dutt Majumder, former chairman of Central Board of Excise and Customs (CBEC), said, “We must not abandon LTUs. Rather, we should extend the concept to STUs (Small Taxpayers Units) in the GST regime. It can have CGST and SGST authorities and income tax authorities as its constituents.”

Reference:

www.ltu.gov.in