No Covid Cess Please: Introduce Return Filing Fee as an Alternative


No Covid Cess Please: Introduce Return Filing Fee as an Alternative

India had recently granted emergency use authorization to two vaccines, Oxford’s Covishield being manufactured by Serum Institute in India and Bharat Biotech’s Covaxin. Government has announced that it will launch the nationwide  COVID-19 inoculation drive with priority to around three crore healthcare and frontline workers.

Media report suggests that Vaccination of Corona virus is going to cost the country around Rs 50,000 Crore. It is indeed a high expenditure and will be around 4% of the annual tax collection of the Government.

Vaccination is going to be the priority of the Government and will be a one-time heavy burden on the Government Treasury which cannot be avoided for any reason whatsoever.

Rumors are high that this cost may be met by introducing Covid Cess, which may be additional 4% if the Government intends to meet the entire cost through cess only.

At present, already 4% education & health cess is there. If 4% additional is loaded, it would make cess costs around 8%. Of course, entire country knows the importance of vaccination and may not be opposed much throughout the country.

Introduction of 4% of covid cess would adversely impact the higher class of taxpayers who are already paying taxes of around 42% as a result of surcharge & cess. Additional 4% would adversely affect such class of assessee again.

Is it worthwhile to introduce the cess of 4% or any other alternative could be there?

There could be an alternative in the form of “Return Filing Fee”. Recently, as a result of section 87A, most of the individuals are not at all liable to contribute any amount to the Government Treasury even if they are filing their income tax returns.  The same can be very well ascertained from the return filing statistics of earlier years.

Apart from Individuals, there are other returns as well where there is no revenue flow like return filed by the trusts, societies, firms/companies having no business income, etc.

Instead of imposing covid cess which will be applicable to only those categories of taxpayers who are already paying taxes, Government may consider imposing “Return Filing Fees”. As a result of this, the treasury will be able to get the revenue from a class of taxpayers who are not paying any amount while filing their income tax return.

The levy of “Return filing Fee” is equally justified for the reason that

  1. Processing of Return has a cost involved.
  2. Once the return is filed, taxpayers is able to utilize the records for other purposes like VISA, Bank Loan, Tender, etc which are the a sort of benefits accruing to the assessee.
  3. The amount of return filing fee could be kept at a minimal amount so that it doesn’t add burden on the filers.

How Much could be Return Filing Fee?

  1. It could be linked with the income of the taxpayers in case of Individual and can start with Rs. 1000/- minimum.
  2. For Firm & Companies, it could also be linked with income starting with Rs. 1500/- as a minimum fee.
  3. For Trust, it could be linked with the gross receipts of the trust. If the gross receipt is exceeding Rs. 10 Lakh, it may be fixed at Rs. 1000.
  4. For societies claiming exemption & deductions, it could be Rs. 5000/ as minimum Fee.

Will it discourage Filing of Income Tax Return?

I don’t think it will discourage the return filing by the taxpayers. At the first instance, return filing is mandatory for firms, companies, trust etc even if their income is Nil.

Other categories of taxpayers having nil income are also filing return for some purpose or other purpose like for availing benefit of carry forward of loss, for keeping a track of their records, for bank loan purpose, etc. I don’t think there will be much impact as a result of introduction of return filing fee.

How much Revenue can be raised by Return Filing Fee?

  1. Return Filing Fee can be introduced from the FY 2020-21 which means that the Government will start getting revenue from 1st April 2021 onwards.
  2. Expected numbers of annual returns could be in the range of 6 Cr to 7 Cr even after the introduction of return filing fee. On an average, return filing fee @ 2000 could result in the annual revenue of Rs. 12000 to Rs. 14000 Cr.
  3. Total revenue for 2 financial years 2020-21 & 2021-22 could be in the range of 24000 to Rs. 28000 Cr.
  4. In addition to this, Government is already collecting 1% as Health Cess which may be around Rs. 15000 Cr per year and it will be around Rs. 30,000 Cr for 2 years. Government may incur entire amount of health cess towards vaccination drive which is once in a life time expenses.

By levying return filing fee, Government may divide the vaccination cost amongst all categories of the taxpayers rather than collecting it from selected few who are already making enough contribution to the Government Treasury.

Hope someone in the North Block is looking for alternative to Covid Cess. Feedback & Suggestions from the readers are invited.

[About the Author: CA NARESH JAKHOTIA]

CA Naresh Jakhotia is a practising Chartered Accountant with more than 20 years of practical experience in the field of Direct Taxes. He is partner of M/s. SSRPN & Co and representing at all CIT (A) as well as before ITAT.

He is regular columnist & author for various articles and columns in the newspaper and professional magazines. He is also a regular speaker in various tax planning seminar & conferences. He is a regular faculty at National Academy of Direct Taxes (NADT) and also in seminar by ICAI, various Industrial & trade Associations. He was the past secretary of Shri Maheshwari Yuwak Sangh and the Treasurer of the leading industrial association of Vidarbha – Vidarbha Industries Association (VIA).

He was the treasurer of the Nagpur Toastmaster Club and member of Direct Tax Committee of the WIRC of ICAI. He was also the Vice President of Orange City Jaycees. He is also the author of the renowned column “The Tax Talk” and in the Central India’s daily newspaper ‘The Hitavada”. Author is also one of the co-promoter of world’s renowned tax portal

CA Naresh Jakhotia is also a author of book “The Tax Talk”-  Interesting issues in Inocme Tax available at Amazon & Flipkart.

Some of the lectures conceptualised & frequently taken by the author includes:

–  Personal Taxation: Planning & Precaution
– Programme designed with an aim to plan the tax affairs for maximum tax benefit with few cautions to be observed.

–  Chhoti Chhoti Bate in Income Tax
– Day to day precautions to be taken from Income Tax Perspective.

–  Making March Meaningful
– Tax Precaution to be taken before March ends.

–  Role of Documentation & drafting in tax Planning
– How to document and draft the optimum tax management

–  Union Budget Analysis
 – A session to understand the direct tax impact of proposal in union budget