The Central government recently dispelled rumors regarding a potential merger of the Central Board of Direct Taxes (CBDT) and Central Board of Indirect Taxes and Customs (CBIC). This statement was in response to news that appeared in various media sources suggesting such a merger. Earlier, the possibility of this merger was mentioned as a recommendation by the Tax Administrative Reforms Commission (TARC) in 2014, but it was not accepted by the government.
Understanding the Boards and Their Functions
Founded under the Central Boards of Revenue Act, 1963, CBDT and CBIC are key components of the Department of Revenue, which falls under the Ministry of Finance’s purview. The two boards have distinct and crucial roles in India’s taxation system.
About the Central Board of Direct Taxes (CBDT)
CBDT plays a significant role in shaping policy and planning for direct taxes in India. It oversees the enforcement of direct tax laws through the Income Tax Department. Direct Taxes encompass income tax, corporation tax, among others.
Role of the Central Board of Indirect Taxes and Customs (CBIC)
The CBIC, initially known as the Central Board of Excise and Customs (CBEC), was renamed in 2018 after the introduction of Goods and Services Tax (GST). It is tasked with drafting policies regarding the levy and collection of customs, central excise duties, Central Goods & Services Tax (CGST), and Integrated GST (IGST).
Non-acceptance of the Merger Proposal
The idea of merging the two boards was put forth as one of the recommendations by the Tax Administrative Reforms Commission (TARC), chaired by Parthasarathi Shome, in their report submitted in 2014. However, the government did not accept this proposal.
The recent clarification by the Central government confirms that there continues to be no plan to combine CBDT and CBIC. The two boards will continue to operate separately, each managing a distinct segment of India’s taxation system.
Importance of the Separate Existence of CBDT and CBIC
The individual existence of CBDT and CBIC is crucial for an efficient taxation system. With distinct functionalities, they handle different tax types. While CBDT manages direct taxes like personal income tax, corporate tax etc., CBIC handles indirect taxes including customs, central excise duties, CGST and IGST. This allows for specialized focus and effective administration in both direct and indirect taxation segments.
The government’s clarification ensures that both boards can continue to focus on their specific areas, ensuring the smooth functioning of the country’s taxation system. This not only guarantees continued administrative efficiency but also prevents any disruption that might occur due to drastic structural changes.
Source: PIB
