Indian Revenue Service

The Indian Revenue Service often abbreviated to I.R.S., or simply IRS, is the administrative revenue service of the Government of India. A Central Service, it functions under the Department of Revenue of the Ministry of Finance and is under the administrative direction of the Revenue Secretary and the ministerial command of the Minister of Finance. The IRS is primarily responsible for collecting and administering direct and indirect taxes accruing to the Government of India. It is the largest civil service amongst the organised civil services in the Indian government and serves the nation through discharging sovereign functions of collection of revenue for development, security and governance.

As with other countries that follow the Westminster system of government, the IRS is part of the permanent bureaucracy of the nation, and is an inseparable part of the executive of the Government of India. As such, the bureaucracy remains politically neutral and guarantees administrative continuity to the ruling party.

The IRS comprises two branches, IRS (Income Tax) and IRS (Customs and Indirect Taxes), controlled by two separate statutory bodies, the Central Board of Direct Taxes (CBDT) and the Central Board of indirect taxes and Customs (CBIC). The duties of the IRS (IT) include providing tax assistance to taxpayers, pursuing and resolving instances of erroneous or fraudulent tax filings, and formulating and enforcing policy concerning income tax in India. The duties of the IRS (C&IT) include formulation and enforcement of policy concerning the Goods and Services Tax, prevention of smuggling and administration of matters related to Customs and Narcotics.

In the 2015 fiscal year, the IRS (IT) processed 3,91,28,247 returns and collected ₹6.95797 lakh crore (equivalent to ₹7.8 trillion or US$110 billion in 2018) in gross revenue, spending ₹6 (equivalent to ₹7.00 or 9.7¢ US in 2018) for every ₹1,000 (equivalent to ₹1,100 or US$16 in 2018) it collected. The relative contribution of direct tax to the overall tax collection of the Central Government has risen from about 36% to 56% over the period of 2000–01 to 2013–14. The contribution of direct tax-to-GDP has doubled (from about 3% to 6%) during the same period.

History

Indian Revenue Service (Income Tax)

Direct taxes in the form an income tax were introduced by the British in India in 1860 to overcome the difficulties created by the Indian Rebellion of 1857. The organisational history of the Income-tax Department, however, starts in the year 1922, when the Income-tax Act, 1922 gave, for the first time, a specific nomenclature to various Income-tax authorities. In 1924, the Central Board of Revenue Act constituted a Central Board of Revenue – the statutory body with functional responsibilities for the administration of the Income-Tax Act.

Commissioners of income tax were appointed for each province and assistant commissioners and tax officers were placed under their control. Officers from the Imperial Civil Services (ICS) manned top posts and the lower echelons were filled through promotions from the ranks. The Income Tax Service was established in 1944, which was subsequently re-constituted as the Indian Revenue Service (Income Tax) in 1953.

In 1963, given the increasingly complex roles and responsibilities of administering direct tax in India, the Central Board of Direct Taxes was constituted as a statutory body under the Central Board of Revenue Act, 1963.

Indian Revenue Service (Customs and Indirect Tax)

With the passing of the Government of India Act, 1919 the civil services—under the oversight of the Secretary of State for India—were split into two arms, the All India Services and the Central Services. Apart from the Central Secretariat, the more important of these latter were the Railway Services, the Indian Posts and Telegraph Service, and the Imperial Customs Service. After Independence, the Imperial Customs Service was reconstituted as the Indian Revenue Service (Customs and Central Excise) in 1953.

The nature of the service underwent a transformational change with the enactment of the One Hundred and First Amendment of the Constitution of India, which overhauled the administration of indirect taxation in India with the introduction of the Goods and Services Tax (GST). With the subsumption of several indirect taxes and levies, including central excise duty and service tax, under the GST, the nomenclature was updated to reflect the changed structure of taxation from IRS (Customs and Central Excise) to IRS (Customs and Indirect Taxes).

Recruitment

The Prime Minister of India, Narendra Modi interacting with the IRS officers of the 2015 batch (on probation).

There are two streams of recruitment to the Indian Revenue Service. IRS officers may enter into the IRS by passing the Civil Services Examination (CSE). The CSE is a three-stage competitive selection process consisting of a preliminary examination, a main examination, and an interview. It is administered by the Union Public Service Commission (UPSC). IRS officers recruited in this way are called direct recruits.

Some IRS officers are also recruited from Central Services (Group B). These include Income Tax Service (Group B), Customs Appraisers Service (Group B), Customs Preventive Service (Group B), and Central Excise Service (Group B). Group ‘B’ officers are gradually promoted over several years of service. The current ratio of two streams at the entry level is kept 1:1. All IRS officers, regardless of their mode of entry, are appointed by the President of India.

Only about 250 candidates out of over 1 million applicants, who apply through the Civil Services Examination, are successful – a success rate of 0.025%.

Training

After selection, successful candidates undergo a 3-month Foundation Course at the Lal Bahadur Shastri National Academy of Administration (LBSNAA) in Mussoorie, Uttarakhand,

Thereafter, IRS(IT) Officer Trainees (OTs) undergo a 16-month specialised training at the National Academy of Direct Taxes (NADT), in Nagpur, Maharashtra, while IRS(C&IT) OTs undergo specialised training at National Academy of Customs Indirect Taxes and Narcotics (NACIN), in Faridabad, Haryana.

National Academy of Direct Taxes

National Academy of Direct Taxes in Nagpur, Maharashtra is the staff training college of the IRS(IT).

Sixteen months of Induction Training is conducted for the directly recruited officers of IRS(IT) at NADT each year. The training is designed into two modules to enable the Officer Trainees to acquire the knowledge and skills they need to function effectively and efficiently as tax administrators. In particular, training prepares OTs to deliver quality taxpayer services, detect and penalize non-compliance, and understand the macroeconomic, taxation and fiscal policy of the Government of India to maximize revenue.

First Module

The First Module emphasizes on giving intense theoretical inputs in the subjects such as Theoretical Concepts and Practical Application of Direct Tax Laws, Advanced Accounting and Finance, and Business Laws-I. It also includes a week-long Parliamentary Attachment, and a two-week Field Attachment.[19] OTs also undergo short-duration training at NACIN, Faridabad, LBSNAA, Mussoorie, and the Sardar Vallabhbhai Patel National Police Academy (SVPNPA), Hyderabad. The first Departmental Examinations are conducted at the end of the first module.

Second Module

The second module includes On-The-Job Training for around eight weeks, followed by Bharat Darshan, and a Financial Attachment for 2 weeks. Further, The OTs are also exposed to the international tax practices through a one or two weeks International Attachment in France, Netherlands, Australia, Malaysia, South Africa, the USA, or Singapore. OTs are also trained to apply theoretical concepts and acquire practical skills through the subjects of Procedure/Techniques of Investigation and Drafting of Orders and Reports, Information Technology and Operations, Management and Administration in the Income Tax department, International Taxation and Transfer Pricing, Law of Governance and Ethics, and Business Laws-II. A number of guest lectures are organized to familiarize the trainees with the best practices in the tax administration.

Officer Trainees are also expected to complete a project on Direct Tax Provisions for the award of a Masters Degree in Business Law and Taxation from NALSAR University of Law, Hyderabad at the time of Valediction from NADT.

National Academy of Customs, Indirect Taxes, and Narcotics

This involves a very dynamic training in specialised matters of conventional tax administration— be it direct or indirect–along with unarmed combat, weapons and explosives. Additionally IRS officers undergo extensive training with Army and the National Police Academy and many other prestigious institutes of the country so that they are better prepared to excel in their multifaceted role. NADT and NACIN both have signed a memorandum of understanding with the National Law School of India University in Bengaluru to award postgraduate diplomas in business laws to the officer trainees. Recently, Finance Ministry has approved exchange of officer trainees to various countries across the world such as Netherlands, Belgium, Switzerland, France, Australia, Malaysia, United States of America, Brazil, South Africa and OECD Nations for increasing exposure to the future administrators.

There are various mid-career training programmes (MCTP) for IRS officers with a view to keep them abreast of the latest developments in the areas of governance, particularly taxation, finance and management. These include the advanced mid career training (AMCTP) which is conducted in 3 phases. Phase I is for joint and additional commissioners, Phase-II is for commissioners and principal commissioners and Phase-III is for chief commissioners and principal chief commissioners. The AMCTP generally consists of a 3-week domestic module held at premier management institutes in the country followed by a 2 week international component at internationally acclaimed universities, depending on their areas of expertise.

Responsibilities of an IRS Officer

IRS officers serve the Government of India in different capacities/roles. While administering direct taxes through the Income Tax Department, they formulate and implement policies, discharge the functions of an investigator, quasi-judicial authority, prosecutor and negotiator of International Agreements etc. Their main roles could be briefly described as under:

Policy formulation: The taxation policies are dynamic and keep changing with the emerging needs of the economy and the country. The tax policy is not limited to raising of revenue. As a part of the overall policy of the Government of India, the tax policy also serves as a tool to address several other objectives in the process of development of the country. These objectives may include providing for incentives and disincentives in the target areas/segments of the economy. Appropriate policy interventions in the direct tax are formulated by the IRS officers based upon the experience in the field formation and other relevant inputs from various sources and submitted to the Government through the CBDT.

Tax administrator, investigator, quasi-judicial authority and prosecutor: Majority of the officers are, therefore, involved in this function in some way or the other. The process of tax collection is mainly driven through the regime of voluntary compliance in which the tax payers have to pay their taxes as per the mandate of the law, following the procedure laid down including • mandatory filing of returns of income or other specified statements. However, there is always a gap between the expected and the achieved level of compliance. Main reason for the gap may include tax evasion through wilful suppression of material facts/ aggressive tax planning or mistakes committed by the tax payers. With a view to detect such aberrations and promote voluntary compliance, several interventions are done through selective scrutiny (examination) of returns/statements, surveys, search and seizure etc. In serious cases of defaults, criminal prosecutions are instituted after completing requisite investigation. In the process, the IRS officers discharge the functions of an investigator, quasi-judicial authority and prosecutor.

Global crusade against black money: One of the most important functions of IRS is detection and curbing black money in the country. While taking all possible measures in this regard domestically, IRS officers are also responsible to negotiate International Agreements with other tax jurisdictions, to plug misuse of international financial processes for tax evasion and avoidance. India has been playing a prominent role, inter alia, in developing the new global standards on automatic exchange of information which would enable the tax authorities to receive information about taxpayers hiding their money in offshore financial centers and tax havens through multi-layered entities with non-transparent ownership, on an automatic basis.

Serving other ministries/departments/organisations on deputation: IRS officers contribute to policy formulation, and make a final decision in certain matters, with the agreement of the minister concerned or the council of ministers (depending upon the weight of the matter), when posted at higher level in the Government of India as a deputy secretary, director, joint secretary or–in rare cases–additional secretary.

International bilateral and multilateral negotiations: IRS Officers participate and negotiate treaties on behalf of the Government of India in the fiscal matters in both bilateral or multilateral forums such as OECD, WTO, World Customs Organization, and the United Nations. They engage in international cooperation in the work areas of exchange of information, transfer pricing, taxation of cross-border transactions, and negotiation of Free Trade Agreements.

Anti-smuggling and narcotics control: Enforcement measures against illicit traffic under the various international conventions and protocols that are in force at present regarding Narcotics control.

Revenue intelligence: On the direct tax side, newly created Directorate of Criminal Investigation under the Central Board of Direct Taxes collects and coordinates the intelligence gathering actions of the department and prosecutes tax offenders. Similarly, on the indirect tax side, Directorate of Revenue Intelligence, i.e., DRI (for custom duty evasion, smuggling etc.) and Directorate of Goods and Services Intelligence, i.e., DGGSTI (for GST evasion) are the agencies which are responsible for the collection of intelligence regarding evasion and smuggling of indirect taxes and also for prosecuting the offenders. A new system of E-way bill is also being rolled out under the GST to check evasion in the inter-state and intra-state goods transfer.

Designations

The designations and time-scales within the Indian Revenue Service are as follows after cadre restructure:

 

Position / Pay Grade in the Government of India

Designations

1

Junior Time Scale

Assistant commissioner of Central GST/Customs (entry-level; probationer)

2

Senior Time Scale

Deputy commissioner of Central GST/Customs

3

Junior Administrative Grade

Joint commissioner of Central GST/Customs

4

Selection Grade

Additional commissioner of Central GST/Customs

5

Senior Administrative Grade

Commissioner of Central GST/Customs and Additional Director General.

6

Higher Administrative Grade

Principal commissioner of Central GST/Customs

7

Higher Administrative Grade +

Chief commissioner of Central GST/Customs and Director General

8

Apex Scale

Principal chief commissioner of Central GST/Customs, CBIC chairperson, member of CBIC and director general

 

Position / Pay Grade in the Government of India

Designations

1

Junior Time Scale

Assistant commissioner of income tax / Entry-level (Probationer)

2

Senior Time Scale

Deputy commissioner of income tax

3

Junior Administrative Grade

Joint commissioner of income tax

4

Selection Grade

Additional commissioner of income tax

5

Senior Administrative Grade

Commissioner of income tax/additional director general

6

Higher Administrative Grade

principal commissioner of income tax

7

Higher Administrative Grade

chief commissioner of income tax or director general

8

Apex Scale

principal chief commissioner of income tax, CBDT chairperson, member of CBDT and director general of the Central Economic Intelligence Bureau

Major concerns

Corruption

In 2015, it was reported that as many as 108 IRS officers were under probe by the CBI for their alleged involvement in corruption. From May 2009 to May 2010, the CBI had sought sanction for prosecution of 102 IRS officials posted in different parts of the country in connection with corruption cases.

In 2016, the Ministry of Finance, dismissed 72 and prematurely retired another 33 Indian Revenue Service officers for non-performance and on disciplinary grounds.

The IRS officials top the Central Bureau of Investigation’s list of most corrupt bureaucrats. In one case, a 1992 batch IRS officer was arrested for accepting a bribe of ₹2 crore in Mumbai. Recently, in another case, some IRS officials were found to help certain companies evade payment of Service tax and related penalties of the order of ₹1 crore. Also CBI raided premises of an income tax officer for demanding Bribe to the tune of ₹60 crore for covering up Stock Guru Scam.

Staff shortages

As of 2013, the IRS has a significant shortfall in employees. Since liberalization era in 1990’s emphasis on governmental cost cutting has been the norm department has been facing shortages in officer and staff cadre. Approximately more than half of the junior officers and staff positions are lying vacant as on date. It was hoped that computerization would reduce the dependence on staff during 2001 restructuring of the department following desk officer system. Subsequently,unscientific promotion policies owing to pressure tactics of the unions have resulted in creation of situation where staff with out any proper experience or qualification are promoted to supervisory ranks seriously jeopardizing the efficiency and service delivery and leaving huge vacancies at the investigation and assessment charges. There have been many instances where drivers have been promoted to the rank of Inspector of income tax which is a bedrock of the investigation mechanism for detecting tax evasion with out proper screening. While this indicates a democratic scenario where every competent worker can aspire to rise up in the hierarchy but no safeguards have been put in place to ensure merit of the promoted candidates. According to the Economic Times, Severe shortages may be negatively impacting the government’s ability to scrutinise returns and catch instances of black money.

Murder of many officers

Even though IRS officers have to deal with sensitive posting in their career they are not provided adequate security. Many IRS officers in the departments of customs and income tax have been assassinated in the course of their investigations.

Recent initiatives

Many new initiatives were taken by the Indian Revenue Service members to curb corruption in their respective departments and make the system more efficient and responsive to the needs of the tax payers. Use of Technology widely reduced scope for the abuse of power. Refund Banker scheme introduced in 2007 eliminated the scope for corruption in the Refunds of Excessive Tax collected by the Department. Introduction of E-filing of Taxes and effective implementation of Permanent Account Number (PAN) are some revolutionary steps that reduced the scope for corruption at all levels while improving the efficiency of the whole system. Use of Centralised Processing Center setup in 2010 at Bangalore of the Income Tax Department reduced unnecessary delays in processing returns. These computerization initiatives have freed up the human resources in the department which are largely responsible for higher revenue collections.

Income Tax Ombudsmen has been created in 2006 and is functional at 12 cities to look into tax related grievances of the public. Department is also gearing to improve its tax payer’s services with Sevottam Scheme. Under this scheme various initiatives such as Citizen Charter, Ayakar Seva Kendra (ASK) which is a single Window mechanism for implementing Sevottam through delivery of these services within the time lines promised in the Citizen’s Charter were launched. Aaykar Sampark Kendra consists of one National Call Centre and 4 regional Call Centres to aid the taxpayer were inaugurated by the Finance Minister.

IRS officers handling sensitive postings are issued a Glock Model 22 pistol or a Glock 23 in .40 S&W caliber.

An IRS officer could rise up-to the Apex Scale (Rs.2,50,000 fixed plus allowances) at the post of principal chief commissioner of income tax in the ITD. At the apex level, he can also get selected as a Member or Chairperson of the CBDT. The intermediate grades in this career progression are deputy commissioner, joint commmissioner, additional commissioner, commissioner, principal commissioner and chief commissioner of income tax. An IRS officer is also eligible to be selected as a member of the Income Tax Appellate Tribunal, Authority for Advance Ruling, Income Tax Settlement Commission and Income Tax Ombudsman as per the prescribed eligibility criteria. Income Tax Overseas Units have been set up designating IRS officers as diplomats in the rank of First Secretary in various missions and consulates of India abroad to look into tax evasion and compliance matters which enables them to work in the place of Indian Foreign Service officers abroad. Cadre Review has been cleared in the Income Tax Department creating 20,751 additional posts to help generate additional revenue of ₹25,000 crore (equivalent to ₹320 billion or US$4.4 billion in 2018) crore annually.