The finance Ministry has recently announced that the tax department will now have Tax Policy Research Unit (TPRU) and Tax Policy Council (TPC) in place of Tax Research Unit and Tax Policy and Legislation.
The Tax Administration Reform Commission (TARC) which was set up in the previous regime, in its report identified handling of tax policy and related legislation as one of the areas which needs structural modifications. Observing that currently, this is handled in the 2 Boards i.e. (CBDT) Central Board of Direct Taxes and (CBEC) Central Board of Excise and Customs, independently in the Tax Research Unit (TRU) an and Tax Policy and Legislation (TPL) wings, the proposals of the Boards reach the Finance Minister in separate channels.
To bring consistency, multidisciplinary inputs, and coherence in policy making, TARC has recommended that a Tax Council supported by a common Tax Policy and Analysis (TPA) unit should be established to cater to needs of both direct and indirect taxes.
Key Features of TPRU
• The Tax Policy Research Unit will have economists, statisticians, operational researchers and legal experts
• For every tax proposal, TPRU will prepare an analysis covering three broad areas - legislative intent behind the proposal; expected change in tax collection; and the likely economic impact through the proposal.
• TPRU will carry out studies on various topics of direct and indirect tax policies and prepare and disseminate papers on tax policy issues. It will also assist TPC, chaired by the finance minister, in taking appropriate tax policy decisions. The Unit will also liaise with state commercial tax departments.
• It will be headed by an officer of the level of chief commissioner at functional level alternatively from the Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC) for a fixed tenure, who will directly report to the revenue secretary.
Key features of Tax policy council
• With an aim to have a consistent and coherent approach to the issue of tax policy and having regard for need to have an interdisciplinary approach, a Tax Policy Council under the Union Finance Minister with 9 other members as given below is constituted.
• The TPC, to be headed by Finance Minister, would have 9 members - Minister of State for Finance, NITI Aayog Vice-Chairman, Commerce Minister, Chief Economic Advisor and Finance Secretary. It would also have secretaries from the department of Revenue, DEA (Department of Economic Affairs), DIPP (Department of Industrial Policy & Promotion) and Ministry of Commerce.
• The Tax Policy Council will look at all the research findings coming from Tax Policy Research (TPRU) Unit and suggest broad policy measures for taxation. The Council will be advisory in nature, which will help the Government in identifying key policy decisions for taxation.
Benefits of these 2 Panels
• The step will enable the government to take an integrated view of direct and indirect taxes and obtain inputs from a broad spectrum of professionals. This will help in the formulation of balanced and forward-looking tax policies.
• It would bring consistency, multidisciplinary inputs, and coherence in policy making.
• The disconnect between the tax policies of CBDT and CBEC has been a key issue of concern, which will be addressed through the decision. The move will sync the tax policies of the 2 boards to the larger benefit of the ministry of finance and tax payers as a whole. The stable and coherent tax regime would help in ease of doing business and would attract investors.