COMMERCIAL TAXES AND

REGISTRATION DEPARTMENT

COMMERCIAL TAXES AND

DEMAND NO.10
REGISTRATION DEPARTMENT
COMMERCIAL TAXES
DEMAND NO.10
POLICY NOTE
2012-2013 COMMERCIAL TAXES

POLICY NOTE
C. Ve. SHANMUGAM 2012-2013
Minister for Commercial Taxes and Registration,
Law,
Courts and Prisons

©
Government of Tamil Nadu
2012
 CONTENTS
10.2.5. Enhancement of powers of 22
Sl. Subject Page assessment of the Deputy
No. No. Commercial Tax Officer
1. Introduction 1-2
2. Administrative Structure 10.3 Measures for better tax
2-3
compliance
2.1 Assessment Wing 3-4 10.3.1. Stipulation of Transit Pass for 23
2.2 Audit Wing 4-5 Petroleum Products
2.3 Appellate Wing 5 10.3.2. Removal of conditional 24-25
2.4 Enforcement Wing 6-8 exemption limit on turnover in
vegetable oils
3. Statistics and Research Cell 8-9 11. Tamil Nadu Traders Welfare Board 25-26
4. Commercial Taxes Staff Training Institute 10
5. Acts Administered 11 12. Samadhan Scheme 26
6. Revenue Collection 12
7. Act-wise Revenue for the past six years 13 13. Goods and Services Tax (GST) 27-28
8. Cost of Tax Administration 14
9. Tax/ Gross State Domestic Product Ratio 14. Compensation of Revenue Loss on 29-32
14-15
account of introduction of Value
10. Tax Exemptions, Tax Reforms and
Added Tax (VAT) and reduction in the
Measures for better tax compliance
rate of Central Sales Tax (CST)
10.1 Tax Exemptions 16-17
10.2 Tax Reforms 15. Information Technology 33-35
17
10.2.1. Amendment to section 3(4) 17-18 (a) End to End Computerisation 35-38
relating to Compounding Project
Provision upto Rs.50 lakhs (b) e-Payment 38-39
10.2.2. Constitution of Clarification 18-19
and Advance Ruling Authority 16. Construction of own buildings 39-41
10.2.3. Provision of Input Tax Credit 19-20
(ITC) to small dealers 17. Right to Information Act, 2005 42
10.2.4. Amendment to section 22(2) 20-21
of TNVAT Act, 2006 for 18. Part-II Schemes for the year 2012-2013 42-43
making provision for
Deemed Assessment
 the momentum during this financial year,
INTRODUCTION
will keep in mind that the role of a good
tax administration is not simply to
Tamil Nadu, a progressive State, has
maximize revenue, but to minimize the tax
always been a pioneer in implementation of
gaps (evasion of taxes) and to increase
various welfare and development
customer (which for the Department is the
programmes. Many of these programmes
mercantile public) satisfaction. Here, it is
have been emulated by several other
pertinent to quote Bird and Jantscher from
States and Government of India. In order
their work ‘Improving Tax Administration in
to maintain the leadership position of the
Developing Countries’ where they have
State and to give governance that strives
said, ‘The best tax administration is not
towards actuating the expectations of its
simply one that collects the most revenue.
people, Vision 2023 document, a strategic
How that revenue is raised … effect on
plan for development of the State over a
equity … and … economic welfare may be
time frame of ten fiscal years has been
equally important.’
prepared under the guidance of Hon’ble
Chief Minister. Commercial Taxes
2. ADMINISTRATIVE STRUCTURE
Department, as one of the important
revenue mobilisers for the State, fully Office of the Commissioner of
appreciates the critical responsibility that Commercial Taxes, who is the
devolves on it for raising resources for administrative head of the Department, is
making the vision a reality. located in Ezhilagam building at Chennai.
In discharge of his responsibilities, the
During the financial year 2011-2012,
Commissioner is assisted by Additional
despite the general economic slowdown,
Commissioner (Public Relations) who looks
Commercial Taxes Department has
after Act Amendments, Tax Rate
achieved a gross revenue collection of
Clarifications, Waivers, Exemptions, etc.,
` 39,544.73 crore, indicating an over-all
Additional Commissioner (Revision Petition)
growth of 27.09% over the previous year.
who looks after Court Cases, Analysis of
The Department, while striving to maintain
orders of Tribunal and High Court, Disposal
2
of Review Petitions, etc., Additional view of tax potential, number of dealers,
Commissioner (Suo Motu Revision) who complexity of business activities, etc.,
deals with Deferral / Waiver Schemes and these Assessment Circles are headed by
section 16-D TNGST cases, etc., Additional Deputy Commissioner / Assistant
Commissioner (VAT) who monitors Commissioner / Commercial Tax Officer.
CST/VAT compensation, GST related works, The Assessing Officers are under the
etc., and Additional Commissioner (Audit) control and supervision of Territorial
who monitors revenue collection, audit Deputy Commissioners (40 officials) at
objections by Accountant General, Public District / Zone level and the Joint
Accounts Committee meetings, etc. The Commissioners (10 officials) at Division
Department has a wide network of offices level. Apart from these Assessment Circles,
spread all over the State. In his work ‘Tax for the Large Tax Payers (top 100 tax
Shastra – Administrative Reforms in India, payers) of Chennai region, four Deputy
United Kingdom and Brazil’, Parthasarathi Commissioners functioning under the
Shome states, ‘A modern tax control of a Joint Commissioner discharge
administration that places tax payers, or the assessment and other statutory
customers, at the centre of its activities functions.
needs to structure its department along
functional lines’. The offices of Commercial 2.2 Audit Wing
Taxes Department which are grouped into Role of proper audit in a revenue
four wings from the point of view of their collecting department cannot be
functionality are in line with this principle. overemphasized and is critical for ensuring
These four wings are described below: compliance with prevalent rules and
procedures. For this purpose, one internal
2.1 Assessment Wing
audit party consisting of one Assistant
319 Assessment Circles of this wing Commissioner and one Commercial Tax
constitute the main interface of the Officer is functioning in each Commercial
Department with the registered dealers. Taxes District / Zone. Quarterly audits as
Based on the importance from the point of per the audit programme fixed by the

3 4
Territorial Joint Commissioners are 2.4 Enforcement Wing
undertaken by these internal audit parties.
There are eight Enforcement Divisions
Further, audit of assessments is also
and one Inter-State Investigation Cell in
undertaken independently by the
the State, each headed by a Joint
Accountant General periodically.
Commissioner. Each Joint Commissioner is
assisted by at least one Deputy
2.3 Appellate Wing
Commissioner or Assistant Commissioner in
The jurisdictional Appellate Deputy supervision of enforcement activity.
Commissioner / Joint Commissioner is the Normally, enforcement activity consists of
first Appellate Authority. There are checking the transport vehicles and
20 Appellate Deputy Commissioners and inspection / audit of the place of business
2 Appellate Joint Commissioners in the to detect evasion of tax, if any. To monitor
State. A Departmental Representative in the inter-State movement of goods
the cadre of Assistant Commissioner vehicles, 28 border checkposts have been
represents the case of the Department established on State borders with Andhra
before the Appellate Deputy Pradesh, Karnataka, Kerala and Puducherry
Commissioners and Joint Commissioners which function round the clock on shift
(Appeals). Against the orders of the First basis. In addition, 8 checkpoints have been
Appellate Authority, second appeal lies with established at Air Cargo Complex (Chennai
the Sales Tax Appellate Tribunal with Main Airport), Harbour Wharf (Chennai), Concor
Bench at Chennai and three Additional Terminal (Chennai), Royapuram Goods
Benches at Chennai, Madurai and Yard, Central Parcel Office (Chennai),
Coimbatore. A State Representative in the Egmore Goods Yard, Salt Cotaurs
cadre of Joint Commissioner and Additional (Chennai) and Tuticorin Port. Of these, the
State Representative in the cadre of Checkpoint at Air Cargo Complex at
Deputy Commissioner represent cases of Chennai Airport has been started recently
the Department before the Main Bench and in view of the suppression of import
the Additional Benches, respectively. purchases and clandestine diversion of
goods from there. As announced, while
5 6
moving the demand for grants of other States to control evasion of tax on
Commercial Taxes Department for the year inter-State transactions and exchanges
2011-2012, a proposal for modernization of data with them for further processing to
27 checkposts [Puzhal incoming has not arrest tax evasion.
been included in view of sanction of
Integrated Checkpost through Home 3. STATISTICS AND RESEARCH CELL
(Transport) Department] and 8 checkpoints
Analytical methods play a useful role
has been prepared at a
in formulation and implementation of any
non-recurring cost of ` 28.95 crore and
tax administration policy. The Department
annual recurring cost of ` 4.41 crore.
is able to generate significant amount of
Checkposts are static locations where information which needs to be analysed for
inter-State movement of vehicles is formulation of specific tax administration
monitored. In order to monitor movement strategies and better implementation
of goods within the State, 55 Roving policies. Towards this end, a Statistics and
Squads have been established across the Research Cell headed by Joint Director of
State and they are provided with modern Statistics is functioning in the office of the
gadgets like Hand-held Terminals to view Commissioner of Commercial Taxes. To
the profile and status of dealers who are ensure proper collection of data from the
transporting the goods. In addition, there field offices, one Junior Research Officer is
are groups available under each Deputy attached to each division and a Statistical
Commissioner (Enforcement) to carry out Inspector is attached to each CT District.
surprise inspection of the place of business
to detect evasion of tax. The same group The Statistics and Research Cell
officers also carry out the annual audit in brings out the following reports regularly:
the business premises after prior intimation
to the dealer. i) ‘Commercial Taxes Department
– At a Glance’ – Annually
The Inter-State Investigation Cell
which is headed by a Joint Commissioner
mainly coordinates with the officers of
7 8
 ii) ‘Selected Indicators on 4. COMMERCIAL TAXES STAFF
Commercial Taxes Department’ – TRAINING INSTITUTE
Annually
iii) Time series on ‘Statistical The Staff of the Department need to
Compendium on Commercial keep themselves updated on any changes
Taxes Department’ – Annually in tax procedures and tax structure. Along
with this, introduction of VAT regime, likely
iv) Revenue Analysis of Top 100 introduction of Goods and Services Tax
dealers for all Divisions and for (GST) as and when it happens, increased
the State – Monthly usage of Information Technology in
Departmental processes, etc., further make
v) Revenue Analysis of maximum
it important to train and update the
revenue fetching commodities for
knowledge of staff on a regular basis. To
all Divisions and for the State –
take care of the training needs of the
Monthly
Department, the Commercial Taxes Staff
vi) Report on Act-wise and Division- Training Institute, headed by a Director in
wise revenue – Monthly the cadre of Joint Commissioner (CT) is
vii) Report on Performance of functioning at Chennai. The institute
Divisions – Monthly imparts “In-Service Training” as well as
“Refresher Course Training” to all the
viii) Report on Evasion Prone officials from the cadre of Ministerial
Commodities – As needed Service to State Service on various Acts
ix) Monitoring and reporting of and related Rules being administered by
prices of VAT commodities to the Commercial Taxes Department.
assess the impact of VAT on Training is also given at Vellore, Salem,
prices – Monthly Coimbatore, Tiruchirapalli, Madurai and
Tirunelveli to the Enforcement and
Statistics and Research Cell also Territorial Wing Officers.
conducts Commodity Oriented Studies to
assess tax evasion as and when required.
9 10
5. ACTS ADMINISTERED 6. REVENUE COLLECTION

Following Acts are administered by Revenue collection and Growth Rates

the Commercial Taxes Department: achieved by the Commercial Taxes
Department under all the Acts for the last
1. Tamil Nadu Value Added Tax Act, 2006 six years is indicated below:
(with effect from 1.1.2007)
2. Central Sales Tax Act, 1956 Year Revenue Growth
collections Rate
3. Tamil Nadu General Sales Tax (`
` in crore)
Act, 1959 (upto 31.12.2006)
2006-2007 19,217 15.66%
4. Tamil Nadu Additional Sales Tax
Act, 1970 (upto 31.12.2006) 2007-2008 19,952 03.83%
5. Tamil Nadu Entertainments Tax 2008-2009 22,570 13.12%
Act, 1939
2009-2010 24,819 09.96%
6. Tamil Nadu Betting Tax Act, 1935
2010-2011 31,117 25.37%
7. Tamil Nadu Tax on Luxuries Act, 1981
2011-2012 39,545 27.09%
8. Tamil Nadu Tax on Entry of Motor
Vehicles into Local Areas Act, 1990 Revenue collection has shown a
9. Tamil Nadu Tax on Entry of Goods into healthy growth during the last financial
Local Areas Act, 2001. year 2011-2012 despite slowdown in
(This Act was struck down by the economy due to various Revenue
Madras High Court by its order dated Augmentation Measures like increase in
23.3.2007 – An appeal against this lower VAT rate from 4% to 5%, increase in
order is pending in the Supreme Court upper VAT rate from 12.5% to 14.5%,
of India) change in rate of tax on tobacco, tobacco
products, vegetable oil, etc., implemented
10. Tamil Nadu Advertisement Tax
by the Department from 12.7.2011.
Act, 1983
11 12
7. ACT-WISE REVENUE FOR THE 8. COST OF TAX ADMINSTRATION
PAST SIX YEARS
The details of revenue receipts and
cost incurred for the Commercial Taxes
Details of revenue collection by the
Department are indicated below. As the
Department under various major Acts
growth in revenue collection is at a higher
administered by it are indicated below:
pace compared to the growth in
(` in crore) expenditure on the Department, ratio of
expenditure to receipts has gone down
during the last financial year 2011-2012.
2007-
2006-

2008-

2009-

2010-

2011-
2007

2008

2009

2010

2011

2012
Act

(` in crore)
1. TNVAT 2290 16472 19440 21477 26558 33997 Head 2007- 2008- 2009- 2010- 2011-
2008 2009 2010 2011 2012

2. CST 2033 1744 1653 1773 2263 2819 1. Receipts 19,952 22,570 24,819 31,117 39,545
2.Expenditure 143.73 187.27 205.10 196.45 224.05
3. TNGST 13416 429 293 218 350 259 3.Percentage
of
4. Entertain 25 16 12 13 16 59 expenditure 0.72% 0.83% 0.83% 0.63% 0.57%
ments to receipts
Tax

5. Betting 6 6 6 7 6 7
Tax
9. Tax / Gross State Domestic
6. Luxury 128 160 170 169 216 256 Product Ratio
Tax

7. Entry 1319 1125 996 1162 1708 2148 The ratio of revenue collection to the
Tax on Gross State Domestic Product when seen in
Vehicles
& Goods the light of the prevailing VAT / Non-VAT
Total 19217 19952 22570 24819 31117 39545 tax rates serves as an indicator of the
efficiency of tax administration. The details
of State’s Gross Domestic Product as
13 14
compared to gross collections of 10.0 TAX EXEMPTIONS, TAX
Commercial Taxes Department are REFORMS AND MEASURES FOR
indicated below. The improvement in gross BETTER TAX COMPLIANCE
collection as a proportion of State’s Gross
Domestic Product is partly due to the 10.1 TAX EXEMPTIONS
increase in tax rates from 12.7.2011 and
In order to get suggestions and
partly as the Department has been able to
opinion of Trade and Industry, a
reduce the tax gap to some extent.
pre-Budget meeting was conducted with
various Associations from all over the State
(` in crore)
on 22.3.2012, by Minister for Finance and
Gross GSDP Percentage Minister for Commercial Taxes and
Year collection by [(2)/(3) x 100] Registration, Law, Courts and Prisons.
Commercial
Based on the representations received
Taxes
(1) (2) (3) (4)
during the meeting and otherwise,
2006-2007 19,217 3,10,526 6.18 % following tax exemptions and reductions
were announced in the Budget speech, and
2007-2008 19,952 3,50,819 5.68 %
were implemented with effect from
2008-2009 22,570 4,01,336 5.62 % 1st April, 2012:
2009-2010 24,819 4,73,519 5.24 %
(a) Exempted Items:
2010-2011 31,117 5,18,576 6.00 %
• Wheat
2011-2012 39,545 5,81,635 6.79 %
(Revised • Oats
Estimate)
• Insulin of all types
• Hand made locks
• Feeding Bottles and Nipples
• Helmets

15 16
(b) Items for which tax was reduced rate of 0.5%), in a year reached ` 50 lakhs
from 14.5% to 5%: at any time during that year, such dealer
was liable to pay tax at the rates
• Electrically operated two wheelers prescribed in the concerned Schedules on
(E-bikes) all his sales, i.e. up to ` 50 lakhs and also
• Splints and veneers for matches above ` 50 lakhs. This led to hardship to
the dealer, because even though he had
• Sanitary Napkins and Diapers not collected any tax on turnover relating
• Compact Fluorescent Lamps and to taxable goods below ` 50 lakhs, still he
Compact Fluorescent Tubes was required to pay tax even for that
turnover.
10.2 TAX REFORMS
In order to rectify this anomaly,
During various interactions, certain
sub-section (4) of section 3 of the TNVAT
difficulties and anomalies in TNVAT Act,
Act, 2006 has been amended so that if the
2006 were pointed out by the trading
turnover relating to taxable goods of a
public. In order to remove these, the
dealer paying tax under the compounding
Government over the last few months have
scheme, in a year, reaches ` 50 lakhs at
brought about the following amendments
any time during that year, such dealer is
to the Act:
liable to pay tax at the rates prescribed in
10.2.1 Amendment to section 3(4) the Schedules only for his sales of taxable
relating to Compounding goods over and above ` 50 lakhs. This has
Provision upto ` 50 lakhs been brought into force from
st
1 April, 2012.
As per clause (b) of sub-section (4) of 10.2.2. Constitution of Clarification
section 3 of the TNVAT Act, 2006, if the and Advance Ruling Authority
turnover relating to taxable goods of a
dealer who had exercised his option to pay Under the erstwhile Tamil Nadu
tax under the compounding scheme (at the General Sales Tax Act, 1959, the

17 18
Commissioner of Commercial Taxes was sum so collected was to be remitted to the
empowered to issue clarification to a Government and forfeited wholly as per
registered dealer on any point concerning section 41 of the TNVAT Act, 2006.
the rate of tax under the Act. No such In order to give relief to the small dealers,
provision was available in the the Government have amended the said
TNVAT Act, 2006. Considering the section 41 to the effect that the amount
advantages of the concept of Advance collected as tax by any person or
Ruling (as is available in the Income Tax registered dealer will be forfeited to the
and Excise Departments of Government of Government only after deducting the
India), the Government have constituted a eligible input tax credit claim, if any, on the
State Level Authority for Clarification and corresponding purchases, if his turnover for
Advance Ruling comprising of the year falls short of the threshold
Commissioner of Commercial Taxes, specified in the Act. This Amendment has
Additional Commissioner (Public Relations) been brought into force from
st
and Additional Commissioner (Revision 1 April, 2012.
Petition) to clarify any point concerning the
rate of tax on an application by a 10.2.4. Amendment to section 22(2) of
registered dealer. The Authority has started TNVAT Act , 2006 for making
functioning from 31st October, 2011. provision for Deemed
Assessment
10.2.3. Provision of Input Tax Credit As per the existing provisions of
(ITC) to small dealers sub-section (2) of section 22 of the TNVAT
Earlier, if any person collected any Act, 2006, the Assessing Authority shall
amount by way of tax (in anticipation that accept returns submitted for the year by
his turnover for the financial year will cross the dealer and if the returns are
the threshold limit of ` 5 lakhs in general accompanied by the proof of payment of
and ` 10 lakhs for dealers engaging in only tax and the documents prescribed, the
local sales) and his turnover for the year Assessing Authority is required to pass an
fell short of the taxable limit specified, the assessment order. In line with the general

19 20
principles of Value Added Tax wherein it is 10.2.5. Enhancement of powers of
envisaged that there will be no compulsory assessment of the Deputy
assessment at the end of each year, the Commercial Tax Officer
Government decided to dispense with the
existing procedure of passing an The powers of assessment of the
assessment order by the assessing Deputy Commercial Tax Officers (erstwhile
authority and to replace it with a system of Assistant Commercial Tax Officers) were
deemed assessment. The intention of the last revised in 2002, and hence were
Government in this regard was announced posing administrative difficulties due to
while moving the demand for grants of the lack of any revision for many years.
Commercial Taxes Department in August In view of this, while moving the demand
2011. Accordingly, a draft Bill has been for grants of the Commercial Taxes
prepared in consultation with the Law Department for 2011-2012, it was
Department and will be introduced in the announced that the assessment powers of
ongoing session of the Assembly. This Deputy Commercial Tax Officers will be
measure once implemented will go a long revised to Total Turnover (including
way in making the interface of the trading exempted items and turnover under the
public with the Department more simple CST Act) not exceeding ` 75 lakhs, subject
and transparent. At the same time in order to total tax effect not exceeding ` 75,000
to avoid misuse by potential tax evaders, per annum from the existing limits of
the current system of detailed scrutiny of ` 20 lakhs and ` 30,000 per annum
twenty percent of the cases selected at respectively. This has been brought into
random by the Commissioner of effect from 5th September, 2011.
Commercial Taxes regarding the
correctness of the returns submitted by the
dealers, will continue.

21 22
10.3 MEASURES FOR BETTER TAX 10.3.2. Removal of conditional
COMPLIANCE exemption limit on turnover
in vegetable oils
10.3.1. Stipulation of Transit Pass for Under the TNVAT Act, 2006, vegetable
Petroleum Products oils are taxable at 5%. However,
exemption from VAT was available till
It was noticed that petroleum 11.7.2011 in respect of tax payable on the
products invoiced for sale to dealers in sale of vegetable oils by any dealer whose
Puducherry by the Oil Companies were turnover on the sale did not exceed
being unloaded and sold in Tamil Nadu ` 500 crore in a year. This exemption was
itself. These unaccounted local sales of conditional and was applicable to TNVAT
petroleum products which were intended Act, 2006 only. Therefore, inter-State sales
for inter-State sales were leading to loss of of vegetable oils were taxable under the
substantial tax revenue due to the State. CST Act, 1956, irrespective of the turnover
This aspect was also pointed out by limit. Till the end of the assessment year
Accountant General in their report. In order 2010-2011, none of the dealers in Tamil
to prevent this evasion of tax, Government Nadu crossed the total turnover limit of
have included Petrol with or without ` 500 crore per year prescribed under the
additives, High Speed Diesel and Light Act and hence no tax was collected under
Diesel Oil in the Sixth Schedule of TNVAT Act, 2006 for vegetable oil during
TNVAT Act, 2006. Through this the that year. When the Revenue
Government have made Transit Pass Augmentation Measures were considered
mandatory for inter-State movement of for funding of various innovative welfare
these petroleum products. and development programmes of the
This requirement has been brought into Government, it was decided to reduce the
force from 1st November, 2011. turnover limit on vegetable oils for sale
under the TNVAT Act, 2006 to ` 5 crore
from the existing limit of ` 500 crore and
this was given effect from 12.7.2011.
23 24
 While analyzing the impact membership of the Board to small dealers
assessment of this measure, it was noticed who are engaging in their business by
that the revenue realization from this obtaining necessary license from the
measure was not to the expected level as concerned local bodies, even if they are not
some unscrupulous dealers were evading registered under the TNVAT Act, 2006 / are
payment of tax by resorting to practices not paying Professional Tax.
like multiple Registration Certificates and
Details of various schemes
deliberately not declaring turnover above
implemented by Traders Welfare Board are
` 5 crore. In order to tackle this tax
available at www.tn.gov.in/tntwb.
evasion, Government have removed the
conditional turnover limit of ` 5 crore, with
effect from 1st April, 2012. 12. SAMADHAN SCHEME
As announced in the Budget Speech
11. TAMIL NADU TRADERS WELFARE for 2011-2012, a Samadhan Scheme was
BOARD introduced for a six month period from
Tamil Nadu Traders Welfare Board is 01.11.2011 to 30.04.2012. Arrears
implementing various schemes like Family pertaining to the assessment years up to
Assistance, Medical Assistance, Educational 2006-2007 for which assessment had been
Assistance, Fire Accident Relief, etc., for made prior to the 1st day of August, 2011
the benefit of traders and their families. under the TNGST (including allied Acts) and
As on 31.3.2012, 46,518 members have CST Acts were eligible for settlement under
been enrolled by the Board and the scheme. The scheme provided for
511 members have received assistance of payment of 100% of the admitted tax and
` 102.42 lakhs from the Board. In order to 40% of the disputed tax along with interest
simplify the process of membership and at 7.5% thereon. The penalty was waived
availing of benefits, Government have done in full. When only penalty and interest were
away with the requirement of annual in arrears, 10% of the penalty and 25% of
renewal of membership by paying ` 100/- interest amount were payable.
every year and also extended the
25 26
13. GOODS AND SERVICES TAX (GST) any tax reform which provides an impetus
to economy and benefits the common man,
Union Finance Minister had announced
trade and industry, at the same time any
in the Central Budget (2007-2008) that
such tax reform should not encroach upon
GST would be introduced from 1.4.2010
the powers vested with the States by the
and the Empowered Committee of State
Constitution of India. The State
Finance / Taxation Ministers will be
Governments, being closer to the people,
requested to work with the Government of
have greater responsibilities in terms of
India and prepare a road map for
providing basic services and implementing
introduction of GST in India. Since then,
developmental schemes. Sales Tax is the
the Empowered Committee, which had
only major and buoyant revenue source
played a crucial role in implementation of
available to the States and this source
VAT across the country, has emerged as a
should not be adversely affected or
platform for the States to voice their
tampered with in the name of tax reform.
opinions and concerns with regard to
various aspects of GST and its Accordingly, Government of
implementation. Tamil Nadu has communicated its concerns
especially on provisions like GST Council,
Government of India had introduced
GST Dispute Settlement Authority, status
the Constitution (One Hundred and
of Entertainments Tax, Tobacco and
Fifteenth Amendment) Bill, 2011 in the
Tobacco Products, etc., to the
Lok Sabha during the Budget Session in
Parliamentary Standing Committee on
March 2011, and the Bill has been referred
Finance. Hon’ble Chief Minister has also
to the Parliamentary Standing Committee
addressed the Hon’ble Prime Minister
on Finance. Chairman of the Parliamentary
seeking his personal intervention to ensure
Standing Committee on Finance had
continuance of consultative process for
addressed the States requesting their
arriving at a broad consensus on the key
views on various provisions of this
issues with regard to GST before
Constitution Amendment Bill. While
consideration of the Constitution
Government of Tamil Nadu is committed to
Amendment Bill.
27 28
14. COMPENSATION OF REVENUE LOSS ` 3,361.36 crore and has released this
ON ACCOUNT OF INTRODUCTION amount to the State. Of the
OF VALUE ADDED TAX (VAT) AND balance amount of ` 650.44 crore, main
REDUCTION IN THE RATE OF component relates to arrear collection of
CENTRAL SALES TAX (CST) ` 924.12 crore and ` 179.13 crore
(deferred taxes relating to the TNGST
In order to avoid double taxation and
period) for the years 2007 and 2008
multiplicity of taxes thereby leading to
respectively, which has been wrongly taken
cascading tax burden, major indirect tax
as revenue gain by the Government of
reform was introduced in the form of VAT.
India accrued during the VAT period. The
While Tamil Nadu was committed to any
issue of pending compensation amount is
tax reform that helped in simplifying
being pursued with Department of
business processes and reduced cost of
Revenue, Government of India.
compliance, it had reservations on potential
loss of revenue on introduction of VAT. One of the underlying principles of
Responding to apprehensions of various Goods and Services Tax (GST) is
States including Tamil Nadu regarding loss functioning of a common market all across
of revenue on introduction of VAT, the the country and hence levy of CST on
Government of India had worked out a inter-State sales is not in tune with GST
compensation package for VAT in regime. As a road map towards
consultation with the States. VAT was implementation of GST, the CST rate was
introduced in Tamil Nadu from 1.1.2007 reduced from 4% to 3% with effect from
and according to the VAT compensation 1.4.2007 and from 3% to 2% with effect
package, the State is eligible to get from 1.6.2008. It was envisaged to
compensation from Government of India at completely phase out CST from 1.4.2010,
the rate of 75% for the year 2007 and when the GST regime was expected to be
50% for the year 2008. For these two in place. As the States were faced with a
years, a total of ` 4,011.80 crore was situation where they will lose a substantial
claimed by Tamil Nadu. Government of amount of revenue due to CST rate
India calculated the due compensation as reduction, it was decided that they will be
29 30
compensated through measures such as States from 2011-2012 onwards,
abolition of Form D, permitting the States even though the States continue to lose
to levy tax on tobacco, sugar and textiles, revenue on account of CST rate reduction
transfer to the States of total revenue of and GST regime is yet to be put in place.
33 services currently subject to tax by While the Government of Tamil Nadu is
Government of India and 44 new services continually taking up the issue with
as and when taxed, and any remaining loss Government of India through the
of revenue was to be compensated by Empowered Committee and also
Government of India till individually, Hon’ble Chief Minister has
introduction of GST. also addressed the Hon’ble Prime
Accordingly, Tamil Nadu had Minister requesting that:
submitted a claim for ` 4,188.38 crore upto
(i) Non-implementation of GST from
2009-2010, of which Government of India 1.4.2010 should not be taken as a ground
released ` 2,577.58 crore. As GST was not to stop the CST compensation and the
introduced as planned from 1.4.2010, Government of India have to provide
Government of India rightly agreed to compensation till GST is introduced as the
release compensation for the year revenue loss suffered by the States is
2010-2011, but against Tamil Nadu’s claim substantial and permanent.
of ` 2,309.34 crore, released a paltry sum
of ` 58.92 crore, citing non-increase of the (ii) Revision of VAT rate from 4% to
lower VAT rate from 4% to 5% during that 5% should not be linked to the CST
year as a reason. This unreasonable compensation for 2010-2011, as it was not
condition which was not stipulated in any of part of the original compensation package
the guidelines for CST compensation is and the VAT revision had nothing to do
being vehemently opposed by all the States with the CST
through the Empowered Committee.
To further aggravate the matters, (iii) If further delay is expected in
Government of India has stated that no implementing the GST, then the CST rate
CST compensation will be paid to the must be restored immediately to the
original 4%.
31 32
15. INFORMATION TECHNOLOGY The Department has its own website
namely www.tnvat.gov.in for the
Commercial Taxes Department is one
mercantile public through which they can
of the pioneers among departments of
access various e-services presently
Government of Tamil Nadu which
provided by the Department like applying
established its own Data Centre way back
for new registration, e-filing of monthly
in 1988. Monthly Returns from entire State
returns, e-payment for online payment,
were entered in this Data Centre and
fast track clearance system at check posts,
processed for generation of MIS Reports.
online issue of transit pass, e-request for
These MIS reports were used for decisions
statutory forms, e-request for refunds to
relating to tax administration policies.
exporters, etc. In addition, the Department
Improvement in Information has an intranet website www.tnct.gov.in
Technology capabilities of the Department that helps the Departmental officials by
continued over the years, but a major step providing them access to various
was taken in 2003 when all the offices of application modules relating to Assessment
the Department were provided with Circles, Check posts, Enforcement Wing,
computers and connectivity to the Central Appellate Wing, etc. Some of the facilities
Server at Chennai. provided by the intranet online application
for the Departmental officials are as
Presently, all the offices of the follows:
Commercial Taxes Department have been
provided with Computer Systems along
• Live report on revenue collection
with required printers including
under various Acts with drill down
Multi-Function Devices. All the 215
facility from State level to Circle level
locations of the Department are connected
through 2 Mbps Leased Lines to the
• Report on the performance of various
nearest Point of Presence (POP) of
offices of the Department
TNSWAN establishing the Wide Area
Network for the Department.

33 34
 • MIS reports like return filed status, Computerisation Project, which was
return audit, input versus output and announced in the Budget Speech for
return scrutiny of the data already 2011-2012. Accordingly, a Detailed Project
entered in the offices Report was prepared with assistance from
M/s Accenture Services Pvt. Ltd. who are
• Online cross-verification of ITC availed the Project Consultants to the Department
by the dealers for conceptualizing and implementing the
• Online notice generation for wrong project. The key components of the Project
claims of ITC are as follows:
• Integration of Territorial and Check (i) Procurement, Deployment,
post modules which enables the Operationalisation and
Assessing Officers to cross-verify the Maintenance of IT infrastructure
data furnished by the dealers in the at all Departmental Locations
monthly returns along with the (ii) Design, Deployment and
movement of goods through Implementation of a centralized
Checkposts web-based application and
dynamic departmental portal for
During the past few months the providing e-services to the
Government have taken major initiatives taxpayers and automating
by taking up a comprehensive End to End internal core tax functions under
Computerisation Project and also improved various Acts administered by the
the e-payment facility available to the Department
dealers, which are detailed below:
(iii) MIS reports and Business
(a) End to End Computerisation Intelligence
Project (iv) Provisioning of a 24x7 Helpdesk
for support to the staff and
The Commercial Taxes Department
taxpayers on any technical or
has embarked upon its next phase of
informational queries
e-Governance by taking up End to End
35 36
 under the Chairmanship of the
(v) Training to all staff from time to Chief Secretary to the Government, with
time to aid the adoption of Principal Secretary (Finance),
re-engineered processes and the Secretary (Information Technology),
new Application Secretary (Commercial Taxes and
Registration), Commissioner of Commercial
(vi) Disseminating awareness and
Taxes and Joint Commissioner (Computer
imparting training to the
Systems) in the office of the Commissioner
taxpayers in use of the new
of Commercial Taxes as members.
system
(vii) Third Party Audit and The tender documents (Request for
Certification of the entire system Proposal) for selection of System
Integrator through tender process are
(viii) Migration to GST including ready and tenders will be invited soon.
modifications/enhancements to
the Application, migration of (b) e-Payment
existing data, etc., as and when
required Facility for online payment was made
available to the dealers through the
(ix) Business Continuity and Disaster website of the Department,
Recovery www.tnvat.gov.in from October 2009
Administrative and financial sanction onwards. Initially, this facility was made
has been accorded in available only through State Bank of India,
GO (Ms) No.13, Commercial Taxes and and subsequently Bank of Baroda,
Registration (D1) Department, dated Indian Bank, Indian Overseas Bank and
18.1.2012, to implement the Project at a Canara Bank were included. The facility of
total cost of ` 230.96 crore over a period of online payment, while ensuring prompt
five years. For regular monitoring of the realization of tax revenue into the
Project, the Government have also Government account and easy
constituted an Empowered Committee reconciliation of accounts with banks, also
37 38
reduces the interaction of the dealers with (`
` in lakhs)

the Department officials thereby bringing in S. Division Details of offices Amount

No sanctioned
better transparency. In view of this
9 more Banks, viz. Punjab National Bank, 1. Tiruvannamalai 1. DC (CT),
Tiruvannamalai
Union Bank of India, ICICI Bank,
HDFC Bank, Axis Bank, United Bank of 2. AC (CT),
Tiruvannamalai-I
India, Corporation Bank, IDBI Bank and 143.99
3. AC (CT),
UCO Bank have also been included after
Tiruvannamalai-
getting accreditation from the II
Reserve Bank of India. 4. CTO (Enft.),
Tiruvannamalai
2. Tiruchirappalli 1. AC (CT),
16. CONSTRUCTION OF OWN Mayiladuthurai-I
2. CTO,
BUILDINGS Mayiladuthurai-
II
203.50
Normally the visiting trading public 3. CTO (Enft.),
Mayiladuthurai
and staff functioning in the offices working
from private buildings face a lot of hardship 4. CTO, Lalgudi 19.00
because many of these buildings are not 5. DC (CT),
specifically designed for housing a Pudukottai
Government Department office. Hence in 6. AC (CT),
Pudukottai-I
order to alleviate the situation, the 7. CTO,
165.00
Government have sanctioned construction Pudukottai-II
8. CTO (Enft.),
of 15 buildings for housing 34 different Pudukottai
offices of the Department at a cost of 9. Staff Training 250.00
Rs 20.15 crore as follows: Institute

10.DCTO, Nannilam 35.00

11. AC(CT), 80.00
Srirangam

39 40
3. Madurai 1. DC(CT),
Sivagangai
138.60
2. AC (CT),
Sivagangai 17. RIGHT TO INFORMATION ACT,
3. CTO (Enft.),
Sivagangai
2005
4. AC (CT), 33.88
Dindigul In a department like Commercial
4. Salem 1. DC (CT), Taxes which has regular interaction with
Sithode
2. AC (CT), Periya the mercantile public, it is especially
Agraharam important that department processes are
3. Appellate AC(CT)
4. Department
155.10 simple and transparent. Towards this
Representative, objective, the Department attaches special
Erode importance to any requests received under
5. Coimbatore 1. DC (CT), 235.00
Valparai
the Right to Information Act, 2005.
2. Staff Quarters, During the year 2011, i.e. from 1.1.2011 to
Valparai 31.12.2011, 255 applications under
3. AC (CT),
Peelamedu Right to Information Act, 2005 were
North received by the Department and action was
4. AC (CT),
Peelamedu South
taken and replies were furnished to the
293.70 applicants promptly.
5. AC (CT),
Aavarampalayam
6. AC (CT),
Thudiyalur
7. AC (CT),
Velandipalayam 18. PART-II SCHEMES FOR THE YEAR
8. AC (CT), 88.00
2012-2013
Mettupalayam
6. Tirunelveli CTO, Kovilpatti 25.00
7. Vellore 1. CTO, Panruti 149.60 Following new schemes have been
(Town)
2. DCTO, Panruti
approved for Commercial Taxes
(Rural) Department during the current financial
Total 34 offices 2015.37 year:-
41 42
 (`
` in lakhs)

Sl.No. Name of the Scheme Amount

1. Purchase of 1 Water Purifier with 1.05
Storage Device (150 litres) and 2 Fax
Machines for the office of
Commissioner of Commercial Taxes
2. Purchase of Rain Coats, Light Batons to 1.35
the Checkpost Staff and Water Cooler
to the Office of the Vellore
(Enforcement) Division
3. Purchase of 2 Generators (63 KVA) for 13.95
Vellore and Tiruchirapalli divisions and
one Generator (30 KVA) for Tirunelveli
Division
4. Purchase of 6 Steel Filing Cabinets and 4.60
10 Godrej Compactors for various
Offices of Commercial Taxes
Department
5 Upgrading facilities in the Offices of the 10.25
Commercial Taxes Department by
provision of Photo copier machines,
Fax machines and Water Purifiers
(150 litres)
6. Purchase of 35 Laser Printers and 9.30
3 UPS (5 KV capacity)
7. Purchase of one iPad 0.56
Total 41.06

C. Ve. SHANMUGAM,
Minister for Commercial Taxes and
Registration, Law, Courts and Prisons

43