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Second Report of Tax Administration Reforms Commission
Oct 06, 2014

Tax Administration Reforms Commission (TARC) submitted its second report. TARC in its Second Report addresses two important aspects of tax administration—capacity building of customs department and data and information exchange. In its First Report, TARC had addressed four terms of reference. These terms of reference were related to customer focus, structure and governance, people’s function, dispute management and key internal processes and ICT.

In the face of the increasingly globalized world, customs today face multidimensional challenges. One the one hand, globalization, while affording opportunities for economic growth also provides opportunities for trans-border crimes. Customs, being at the frontline of the border have to play an important role in the country’s physical as well as economic security. At the same time, they have to facilitate legitimate trade so as not to impair the country’s competitiveness and attractiveness as an investment destination. The steady growth of international trade leading higher volumes and the emerging trends such as increase in regional trading arrangements etc., e-commerce, changing supply chain dynamics etc. are adding to the challenges faced by customs. These trends necessitate creation of new capacities in diverse areas without necessarily increasing the human resources. The demand on customs, therefore, is to do more with less.

To face this challenge, Indian customs would need to move away from their traditional administrative approach towards a more proactive and wholesome compliance management approach. They would need to transform their governance, change their control paradigm and become a highly technology driven organization with a robust and reliable risk management based approach to governance. They will have to move away from excessive revenue orientation to be able to fulfil their mandate in relation to areas such as supply chain security, effective implementation of their responsibilities in trade related areas, IPRs, OGA requirements etc. and play a much more proactive and prominent role in trade facilitation. Hence their compliance philosophy needs to be oriented towards promotion of voluntary compliance based on a trust based approach towards the compliant trade coupled with very effective enforcement against noncompliance. This will require large investments in capacity building in human capital as well as physical and technological infrastructure. Trade facilitation in particular will need capacity building not only in customs but also in other regulatory agencies. By virtue of their strong background in cargo processing and high international alignment of customs processes, customs need to be given a lead role to achieve inter agency harmonisation and coordination in this area.

To enable the transformative changes that are required, the government needs to empower and enable customs by according the CBEC functional and financial autonomy as recommended in the TARC’s first report, subject, of course, to the restructuring and accountability as also recommended in that report.

In its Second Report, TARC makes recommendations with regard to capacity building of Customs Department in the following areas:

  • Governance

  • Customs core clearance processes

  • Enforcement and Anti-smuggling

  • Technology and Logistics

  • Safe framework and Trade facilitation

  • RTAs and Trade remedies

  • International Co-operation

  • Capacity building


As regards, data and information exchange, TARC makes the following recommendations in its Second Report:

  • Common Framework

  • Common standards and Taxonomy

  • Third-party Exchange

  • Data Storage

  • Data Usage

  • Safeguard and Security

  • Audit and Accountability

  • Personnel Management

  • Revamping the FIU and CEIB


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