Prime Minister Narendra Modi’s call for belief in people’s honesty and fundamentally reforming the tax system to make it more people-centric reflects the government’s vision of a new governance model.

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Along with finance minister Nirmala Sitharaman, the PM has reinforced that the future of tax reforms will be based on trust, transparency and technology. In this direction, the faceless e-assessment scheme (FAS), faceless appeals and the taxpayers’ charter are transformational initiatives, which will bring greater efficiency, transparency and accountability in tax administration.

What is FAS? 

The efforts towards reforming the tax administration started a few years ago with the introduction of e-assessments conducted over email and through a portal. These were done by the jurisdictional tax authority in which the identity of the officer was known to the taxpayer.

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The new FAS, launched in 2019, goes a step further by using artificial intelligence for automated, randomized allocation of cases such that the identity of the tax office is not known to the taxpayer. This is a novel mechanism not found in any of the known jurisdictions and can become a global benchmark for compliance verification. 

The government’s new measures that allow for anonymised assessment will enhance the transparency and efficiency of the tax system, which would help bridge the trust-deficit and contribute to nation-building.

By eliminating frequent personal interaction between taxpayers and the tax department, FAS significantly minimises malfeasance. It saves precious time and resources of the taxpayers that were earlier spent on multiple visits to the department, filing hard copies of bulky submissions and completing formalities.

Since the launch of the scheme in September 2019, 8,700 out of 58,000 cases have been concluded. The Central Board of Direct Taxes (CBDT) has directed that all assessments henceforth will be passed by NeC, except for centralised group cases (search cases) and assessments with international charge (generally, involving non-residents).

Challenges to be met with the new model

Even as the government is working towards addressing the potential challenges, a few areas will be critical to realise the full benefit of the new scheme. Key among them is the voluminous online submission and explanation of intricacies of business models. It will require high quality and clarity in communication on behalf of the taxpayers to avoid any misunderstanding and unnecessary litigation. Small taxpayers, particularly, will need to equip themselves to make use of the FAS.

Secondly, given the number of taxpayers and their detailed online submissions, the digital process under the scheme will need huge capacity-building and a robust systems support to drive it.

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Further, the multiple units, while providing functional specialization, must maintain close and effective communication between them for an all-rounded review of cases.

Modi has urged every citizen to be a part of nation-building by coming forward as an honest, fearless taxpayer. On its part, the government has been working on ways to reduce the compliance burden of taxpayers, reduce litigation and bridge the trust-deficit gap. After the implementation of the goods and services tax, the taxpayers’ charter, faceless assessments and appeals will be the next reforms to reshape India’s tax administration.

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