Dear Tax Payers, Tax Practitioners,

I wish you all a very happy and prosperous new year 2008. The year 2007 ended with a note of satisfaction due to robust economic growth. The vibrancy and buoyancy in the Indian economy, coupled with the initiatives of tax administration is expected to achieve buoyancy in tax revenue.

2. I congratulate you for your co-operation and support to the department in the various issues in last one year. The new year is a beginning of an historic indirect tax reform in the country. In the last budget speech of Union Finance Minister, he mentioned that, at his request the Empowered Committee of the State Finance Minister has agreed to work with him and to prepare a road map for the introduction of Goods and Service Tax (GST). In view of this announcement, the Empowered Committee in consultation with the Central Government decided to constitute a joint working group with Dr. Parthsarthi Shome, an advisor for the Union Finance Minister as a convenor, to prepare a road map for the introduction of GST from 1-4-2010. The Empowered Committee has formed the three sub-working groups. The sub-working groups met on the various occasions and submitted its report to the Empowered Committee. Needless to state that the initiative of the Government of Maharashtra, in this regard, finds a reflection in the final report submitted by the Empowered Committee to the Central Government.

3. The introduction of GST is a natural corollary to the extension of VAT. Over the year the Indian economy has grown from agrarian to industrial and is now spread over to a very large service sector. The contribution of services in the economy has grown very rapidly in the last decade. This is more so in the case of developed state like Maharashtra wherein the contribution of services in the GSDP has now overshadowed the contribution of goods. With the rapid growth of the service sector and opening of the economy, India has become part of the developed countries. The introduction of the GST is in line with the economic process of reform. The GST would provide a level playing field to the manufacturer of goods as well as to the producers of services at one hand and to the domestic as well as foreign firm on the other hand, which will make the country a truly international market. It will remove the cascading of taxes across the goods and services. The GST is also expected to remove certain aberrations of the VAT era such as different laws for the different states, deviation in schedule rates, classification dispute in absence of a common HSN code, multiplicity of tax rates etc. Once these aberrations are removed it will usher an era of Pan India Tax regime. A lot of development in this regard, is expected in the current year. I will keep you abreast regarding the development in this direction in the current year. The department is in a process of setting up of a working group to suggest the probable tax structure and the business processes under the GST. The working group will constitute both departmental officers as well as the outside experts.

4. After I assumed the charge as Commissioner of Sales Tax, I had interacted with the departmental officers, the practitioners and the various trade associations. After exhaustive deliberations, a Road Map for the sales tax department along with a 15 point action plan is prepared. I had an opportunity to discuss the road map with all of you on various occasions. I am happy to note that the preparation of the road map helped in understanding the problems and their possible solutions. Progress of the road map is being reviewed on a weekly basis. The progress on the various action points in the Road Map is by and large as per the expected time schedule. There are some slippages in time schedule which are mainly due to delay in stabilizing of the automation processes.

5. Last year had witnessed stabilizing of various business processes of the VAT functional branches. The much needed manuals of procedure for all the branches are now finalized. The concerned employees have been exposed to the training of the VAT manual and all the functional branches have now started functioning as per the new VAT manual. Maharashtra is the only State which has successfully finalized and started using the VAT manual.

6. After the introduction of VAT, the tax burden on the erstwhile first point tax payers has been substantially reduced due to grant of full input tax credit. It is expected that, this reduced tax base of importers and manufacturers will be compensated by the value addition in the subsequent stages of production and distribution. These dealers were earlier either not in the tax net or had not been given due attention. To improve the compliance of these dealers, it is necessary to undertake a massive survey activity. The survey branch across the state has since started working. I appeal to you to extend your support in this regard.

7. The new simplified process for grant of refund and the completion of refund audit is in place. The refunds will now be issued in much lesser time keeping in view the amended provisions of the Act which makes it mandatory to grant the refund within three months.

8. The paradigm shift in the functioning of the department under MVAT is a move to change the focus from assessment to audit. The business audit is expected to give more insight to the officers to understand the dealer’s affairs which will improve the tax compliance. The business audit is also expected to act as a bridge between the tax-payers and the department. Across the State the business audit branch has now started functioning. After the initial feedback of the business audit branch, necessary changes in the process, if required, will be made. I also expect your feedback in this regard.

9. In continuation of our efforts to become a responsive tax administration, a new Grievance Cell and a Vigilance branch is opened in the department. The Grievance Cell is expected to resolve the dealers’ grievances in a guided and a time bound manner. Also, Vigilance branch is expected to keep a watch on the employees to reduce corrupt practices, if any.

10. Nodal officers of the rank of the Deputy Commissioners are appointed to interact with the various trade associations. This nodal officer is a liaison between the trade and the department. This officer will interact with the association on a regular basis, inform them about the recent happenings in the department including the changes in tax laws and the issuance of various trade circulars. This officer will be a link between the trade and the department and will enable the department to understand the problems of the particular trade in a better manner.

11. The advisory committee meetings and the service cell meetings have started regularly across the State which is also helping in understanding the dealers’ problems in a better way.

12. Considering the difficulties faced by the small dealers in filing the tax returns, a new return periodicity, large number of dealers will now be required to file lesser tax returns.

13. The department is moving to a system wherein the returns can be filed electronically. The scrolls from the banks have started coming electronically. This is a major step towards improving the compliance and improving the efficiency of the department. A Trade Circular has already been issued and the necessary amendment in the rule is expected very soon. I am sure, with the above initiatives, very soon this Department will be the best tax department in the Country.

14. As one feels satisfied about the various initiatives taken by the administration, there are many more challenges ahead. The automation of the department is much delayed. The VAT administration can effectively work only on an automated system. The compliance of the dealers in filing the returns have substantially come down. The department has now initiated a massive drive to chase the defaulting dealers including the action of levy of penalty and prosecution. I appeal to all of you to voluntarily come forward and discharge the obligation of filing of tax return and help the department in this process.

15. I once again extend my warm appreciation for your continuing support and assure you of a more proactive and responsive tax administration in the coming year.