Kerala Database

Commercial Taxes

N. Ramalingam

1.0. Introduction

The concept of 'information system' is now well known and there have been attempts from time to time for improving the information-base of Government departments and public sector organizations in India. An Advisory Committee on management accounting and management information system in Government was set-up in 1976 under the Chairmanship of the then Union Finance Minister and this Committee constituted a Sub-group in performance budgeting and management information system. The National Informatics Centre also has set up a number of divisions to assist Government organizations in developing management information system.

2.0. An Information System for Kerala

This paper attempts the following: -

the need for a strong database on decision-making / policy strategy formulation in Government;

information / Data gap in the Commercial Taxes Department of the Government of Kerala; and

suggest a pattern for a comprehensive computer based information system [CBIS]

2.1. Decision Making and Data Base

Any Government department (or organization) consists broadly of two distinct cadres of employees: managerial and workers. The distinction is often not so simple. In every Government department (company) there are primarily two sets of people - the potato peelers and the potato separators. Potato peelers are non-officers (non-managerial cadre) potato separators are officers (managerial cadre). Of course every Department, in addition, carries a large number of potatoes (tasks) as well. If at higher levels, an organization or department has efficient potato separators, it runs well. On the other hand, if potato peelers dominate, inefficiency, wastefulness and failure are the usual outcome.

The managerial cadres of the Government departments are to take decisions for effective objective-oriented action. Ideally, what is more important in decision making is that the decisions must be timely, taken at proper levels, and based on relevant data.

Good decisions are a combination of relevant data / information, good thinking and decisiveness. Good decision contains the best elements of democracy and dictatorship. Before a decision is taken all-democratic processes should be gone through: Data collection, feedback, analysis, and consultation. It gives one the benefit of the wisdom of so many people and their work. No doubt it is a little time-consuming but except in emergency, such delay is worthwhile. Once the decision is taken the implementation should be speedy, decisive and without dissent, dispute, doubt, dithering or disobedience, till the time arrives for a review. Unfortunately most of the officials follow the reverse method. They take decisions dictatorially - arbitrary, adhoc, hunch-based, impulsive and obstinate and implementation is left to be done democratically. This may be mainly due to the lack of data, processed useful data or information.

In most of the Government departments there is a mass of data which flows from one level to another. At the same time, these officials feel handicapped because of the lack of required information, which they need for appropriate decision-making. Thus, there is a paradoxical situation where, on the one hand, there is no dearth of data and on the other; the officials do not get the information they want. The reasons are the following:

The data which are generated and which flow in a Department are not determined on the basis of exact information requirements at the user level.

Inappropriate analysis of data so as to convert them into meaningful information, which is the basic requirement for decision-making.

There is a considerable time lag in obtaining the required data, with the result that by the time it reaches the user, it become dated for decision-making.

In the Government departments, information has two major roles to play: (1) to impel the officials to take decision / action; and (2) to provide factual basis for taking such a decision / action. In the present information set-up of Departments both, these roles are not often properly performed. The result: -

The officials do not exactly know which is the best or the required moment for taking a particular policy / decision or action.

The data available to them provide only a particular basis for decision-making and they have to depend mostly on their personal experience and judgment for determining any particular course of action.

The major underlying reason for most of the weaknesses in the existing information set-up is the lack of a systems approach. To provide each officials of the Department with the appropriate information and only the appropriate information, in the right form and at the right time, a system is required for collecting, disseminating, selecting, relating, classifying and interpreting the information according to the needs of the user. If the information set-up is based on the information needs of the user and is scientifically developed so that all inter related aspects of information handling such as analysis, storage and retrieval, flow, use etc. are adequately considered, then it will fulfill the requirements of an effective Management Information System. Moreover, a system would convert the mass of data available into meaningful and required information. Thus if the existing information set-up is to be improved and rationalized in the Departments, it is imperative that a systems approach is used to all different aspects of information handling.

2.2. Computer Based Information Systems

An information system can be defined as a set of inter-related components that collect (or retrieve), process, store and distribute information to support decision making and control in any organization. In addition to supporting decision-making, co-ordination and control, information systems may also help managers and workers to analyze problems and to visualize complex situations. Information means data that have been shaped into a form that is meaningful and useful to a concerned person. Data, in contrast, are streams of raw facts representing events occurring in an organization or the environment before they have been organized and arranged into a form that people can understand and use.

Four activities in an information system produce the information relevant to the department / organization. These activities are input, processing, output and feedback. Input captures or collects raw data from within the department or from its external environment. Processing converts this raw input into a more meaningful form. Output transfers the processed information to the people or activities where it will be used. Feedback is output that is returned to appropriate members of the organization to help them evaluate or correct the input stage. Information systems can be either computer based or manual.

2.3. Commercial Taxes: Information System

Commodity taxes constitute approximately 70% total revenue receipt of the State and more than 90% of the State's own tax revenue. An analytical study of the existing information system of the Commercial Taxes of Kerala is vital in this context:

A complete switch-over from the present origin-based single point sales tax systems to a destination based multipoint value added tax system from 1-4-2003 onwards.

The present financial crunch or cash trap resulting from an arithmetic progression of tax revenue collection and the geometrical progression of revenue expenditure.

Most of the inputs for the information of CTD comes from the periodical statements filled in by the officials of the unit offices (Circles) and sent to the head quarters (Commissionerate of Commercial Taxes) after consolidation at the District Head Quarters. These statements are:

Monthly Progress Reports relating to targets achieved by the individual assessing authorities.

Report of number of the registered dealers, which includes details of new case, files received from other Circles and list of files transferred etc.

Statements of pendency and disposal of registration, amendment, cancellation, rectification and refund application. It gives also the periods of pendency indicating the number of old cases at the end of the each month.

Statement of the progress of assessments in respect of registered dealers where original assessment is due under Kerala General Sales Tax Act, 1963 and Central Sales Tax Act, 1956 separately.

Statement showing pendency and disposal of revenue / re-assessment cases

Statement showing additional demand created

Statement of demand created during the current year and variations therein

Statement showing the progress of cases seized / surrendered

Statement showing the number of surveys / shop inspection conducted by officials

Statement regarding revenue recovery cases

Statement of disposal of appeals etc.

Statement of collection of security deposits at check-post.

Each statement has a variety of details, which would help administration. Broadly the statements provide information relating to monthly/quarterly progress made by individual assessing authority in assessments, number of registered dealers under KGST Act, 1963 and CST Act, 1956, pendency and disposal of registration, amendments, cancellation, rectification and refund applications, number of assessments in respect of registered dealers, additional demand created, cases of seized or surrendered documents, surveys conducted, recovery certificates etc.

According to the procedures laid down in the Commercial Taxes Department, data have to be transmitted to the statement from the 72 Registers to be maintained as per the Volume III of Agricultural Income Tax & Sales Tax Manual. It is observed that in most of the cases these Registers are neither maintained properly nor kept up-to-date. Sometimes, registers are not maintained at all.

One of the main sources of data of the Registers is the periodical statutory form (such as registration forms, annual return forms etc.) submitted by the assessees as per the KGST Rules, 1963. At present, there are 96 statutory forms enumerated in the KGST Rules, 1963. Since most of the forms are unstructured and have not been revised for a pretty long time, appropriate submission of disaggregated figures becomes impossible and time consuming to the assessees. Such disordered and, not-so-relevant data supplied by the assessees in the statutory forms are posted in the concerned registers and from these statements are prepared and submitted to the Commercial Taxes Department for statistical / data base purposes. This heavy duplication of manual work coupled with other tasks like revenue collection, file management etc. overburden the assessment clerks. Hence, the clerks are forced to submit less accurate and untimely statements.

The coverage of the information collected, also is often inadequate; and the manner of collection is not appropriate for speedy procurement of data. The processing of the data takes an unduly long period of time. As a result, whatever information is collected cannot be put to effective use either for administering tax or evaluating the efficiency of enforcement or for estimating the effects of contemplated policy changes. Apart from the limitations in the collection and analysis of the database, there is a clear absence of vital information for evaluating the impact of tax and effectiveness of the enforcement of the tax in the following areas:

Commodity-wise tax revenue
Distribution of dealers by place of business and turnover ranges
Arrears of tax classified according to age / area basis

Trends in the turnover of commodities
Tax payable and tax paid by turnover ranges
Groups of dealers and types of dealers (i.e., importers, manufacturers, wholesaler, retailer and exporters etc.)
Commodity classification of Government purchases
Commodity-wise turnover of exempted commodities
Estimation of tax evasion
Commodity-wise consumption of final consumers

Our discussion above indicates that there are many vital data / information gap in the present system, and that the data needed are not being collected properly. Considering these constraints and especially in the context of the introduction of Value Added Tax, a model for a computer based information system is suggested for the Commercial Taxes Department of Kerala (Annexure I). Government of Kerala has already initiated positive steps in computerizing various departments including Commercial Taxes Department. Although a computer based information system use computer as a tool, there is a sharp distinction between computer (hardware and software) on the one hand and information system on the other. Housing provides an appropriate analogy. Houses are built with bricks, cements and wood but these do not make a house. The architecture, design, settings, landscaping and all of the decisions that lead to the creation of these features are part of the house and are crucial for finding a solution to the problem of putting a roof over one's head. Computers and programmes are like bricks, cement, wood of computer based information systems, but they alone they cannot produce the information for a particular department / organizational needs. To understand information system one must understand the problems they are designed to solve, their architectural and design elements and the organizational processes that lead to these solutions.

3.0. Conclusion

The model suggested here for the Commercial Taxes Department enumerates only one side of the computer based information system, the other side being computer (hardware and software) and the heartware (human element). The challenges of the present day tax administration are to combine tax literacy with computer literacy and literacy relating to information systems.

INPUT	PROCESSING	OUTPUT	ACTION, DECISIONS, POLICY FORMULATION & FEEDBACK
*SOURCE* Internal Source Statutory Forms submitted by Assessees Officers Public Manual / Registers Invoice Details Account Details External Source Dept. of Customs & Central Excise Dept. of Income-Tax Reserve Bank of India Planning Commission Industries / Commerce Ministry, Govt. of India Commercial Taxes Dept. of other States (especially neighbouring States) Industries Dept. of Govt. of Kerala Planning Board, Govt. of Kerala Local Bodies in Kerala Decentralized method of data collection [collection at each unit office {circle office} and District Head Quarters]	ACTIVITIES Data collection and collation, data storage Related data based management Centralized method of processing at Head Quarters at Thiruvananthapuram and sub-processing Centres at Ernakulam and Kozhikode.	*RESULTS* Up-to-date highly disaggregated results Data trends and analysis of the following·\| Commodity-wise output (tax, price, turnover and consumption) Assessee-wise output Unit office-wise output District / Area-wise output Officer / Non-officer-wise output Period-wise output etc Decentralized system with restricted jurisdictional access (verification and cross verification) on the processed data Commissioner (Whole State) District Deputy Commissioners (access on the processed data of their relevant districts only) Officers (access on the processed data on their relevant Circles only)	ANALYSIS Detection of offence Control of bogus transactions Estimation & action on over-dues Scientific Audit assessments Circle (Unit office) office Management Assessee tax compliance on factual database Officer performance evaluation on factual database Survey, search, seizure, penalty, prosecution Revenue collection Follow-up of selective assessees / stock filers Check-post management Policy Strategy Formulation

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