commercial tax department of state of kerala,...

Impact Assessment of Tax Automation of

Commercial Tax Department of State of

Kerala, India

Report

December 13, 2010

Impact assessment of tax automation of CTD, Kerala I of 105


Table of Contents

1 EXECUTIVE SUMMARY ................................................................................................................................. 10

1.1 IMPACT ASSESSMENT OF KVATIS- COMMERCIAL TAX DEPARTMENT ......................................................................... 10

1.2 IMPACT ASSESSMENT OF KVATIS- EMPLOYEES ..................................................................................................... 13

1.3 IMPACT ASSESSMENT OF KVATIS- DEALERS AND PRACTITIONERS ............................................................................. 13

2 INTRODUCTION ........................................................................................................................................... 17

3 APPROACH AND METHODOLOGY ................................................................................................................ 19

3.1 SAMPLING PLAN, SAMPLING SIZE AND PROFILE ..................................................................................................... 19

3.1.1 Dealers /Tax payers ............................................................................................................................... 19

3.1.2 Tax practitioners .................................................................................................................................... 21

3.1.3 Employees of the Commercial Tax Department .................................................................................... 22

3.2 PILOT TESTING AND VALIDATION OF RESEARCH INSTRUMENTS .................................................................................. 23

4 KERALA VALUE ADDED TAX INFORMATION SYSTEM ................................................................................... 24

4.1 ABOUT THE DEPARTMENT ................................................................................................................................. 24

4.2 NEED FOR IMPLEMENTATION OF KVATIS............................................................................................................. 25

4.2.1 Dealers perspective ............................................................................................................................... 27

4.2.2 Department’s perspective ..................................................................................................................... 27

4.3 KVATIS ........................................................................................................................................................ 29

4.3.1 Software Modules .................................................................................................................................. 29

4.4 OBJECTIVES AND GOALS OF KVATIS ................................................................................................................... 30

4.5 ACHIEVEMENTS / OUTCOMES OF THE PROJECT ...................................................................................................... 31

4.5.1 Dealer’s perspective .............................................................................................................................. 31

4.5.2 CTD’s perspective .................................................................................................................................. 32

4.5.3 Awards and recognitions ....................................................................................................................... 34

4.6 GEOGRAPHIC AND FUNCTIONAL COVERAGE OF KVATIS .......................................................................................... 35

4.7 HISTORY OF EVOLUTION ................................................................................................................................... 35

4.7.1 Phases of Implementation- Milestones ................................................................................................. 36

4.8 THE VISIONARY’S OF KVATIS- THE TOP MANAGEMENT .......................................................................................... 39

4.9 STAKEHOLDERS ............................................................................................................................................... 40

4.9.1 Technical Committee ............................................................................................................................. 40


4.9.2 IT Management Cell ............................................................................................................................... 40

4.9.3 Gulati Institute of finance and taxation (GIFT) ...................................................................................... 40

4.9.4 Software /Hardware and Network Vendors .......................................................................................... 41

4.9.5 Kerala State IT Mission........................................................................................................................... 41

4.9.6 VAT Consultative Committee (VCC) ....................................................................................................... 41

4.9.7 Akshaya Kendras .................................................................................................................................... 41

4.9.8 Dealers ................................................................................................................................................... 42

4.9.9 Sales Tax Practitioners /CA’s /Law Agents ............................................................................................. 42

5 IMPLEMENTATION FRAMEWORK ................................................................................................................ 42

5.1 CAPACITY BUILDING INITIATIVES ......................................................................................................................... 42

5.1.1 Training Initiatives ................................................................................................................................. 42

5.1.2 Investments on Training ........................................................................................................................ 42

5.1.3 Investments in IT .................................................................................................................................... 44

5.1.4 Investment in awareness programs and communication plans ............................................................ 46

5.1.5 Communication Plans- Via Government Orders .................................................................................... 47

5.2 ORGANIZATIONAL STRUCTURE OF CTD PRESENT/ PRIOR TO KVATIS ......................................................................... 48

5.2.1 Organisational chart before computerization ....................................................................................... 48

5.2.2 Organisational Structure after KVATIS/Computerization ...................................................................... 48

5.2.3 Roles and responsibilities of ITMC ......................................................................................................... 49

6 IMPACT ASSESSMENT FRAMEWORK ........................................................................................................... 50

6.1 IMPACT ASSESSMENT FOR TAX PAYERS AND AGENTS ............................................................................................... 50

6.1.1 Quantitative analysis ............................................................................................................................. 50

6.2 IMPACT ASSESSMENT FOR EMPLOYEES OF COMMERCIAL TAX DEPARTMENT ................................................................ 51

6.2.1 Quantitative Analysis ............................................................................................................................. 51

6.2.2 Qualitative Analysis................................................................................................................................ 51

6.3 IMPACT ASSESSMENT FOR COMMERCIAL TAX DEPARTMENT .................................................................................... 52

6.3.1 Other quantitative key statistics post automation ................................................................................ 52

7 IMPACT ASSESSMENT OF KVATIS ................................................................................................................ 53

7.1 DEALERS AND TAX PRACTITIONERS ...................................................................................................................... 53

7.1.1 Economic Cost Impact ........................................................................................................................... 53

7.1.2 Better Governance and Service levels ................................................................................................... 55

7.1.3 Increase in number of clients for practitioners ..................................................................................... 56

7.1.4 Effectiveness of KVATIS- Dealers and practitioners ............................................................................... 57


7.1.5 Factors responsible for adoption of KVATIS .......................................................................................... 58

7.1.6 Impact of Awareness programmes carried out by department ............................................................ 59

7.2 EMPLOYEES OF COMMERCIAL TAX DEPARTMENT .................................................................................................... 61

7.2.1 Better Governance ................................................................................................................................. 61

7.2.2 Contribution to organizational goals ..................................................................................................... 63

7.2.3 Employee productivity and morale........................................................................................................ 64

7.2.4 Effectiveness of each parameter KVATIS – Employees .......................................................................... 65

7.2.5 Training effectiveness ............................................................................................................................ 65

7.3 OVERALL RATING OF KVATIS ............................................................................................................................ 66

7.4 COMMERCIAL TAX DEPARTMENT ....................................................................................................................... 67

7.4.1 Increase in revenue collection ............................................................................................................... 67

7.4.2 Month wise revenue collection for the last 3 years .............................................................................. 68

7.4.3 Increase in tax base (number of returns filed) ...................................................................................... 69

7.4.4 Increase in the number of services availed ........................................................................................... 70

7.4.5 Trend in online vs Offline payment - Based on the amount of transactions per year ........................... 71

7.4.6 Trend in interstate transactions ............................................................................................................ 71

7.4.7 Fund utilized for Akshaya Kendra- Filing of Returns .............................................................................. 72

7.4.8 Return per employee ............................................................................................................................. 73

7.4.9 Employee productivity ........................................................................................................................... 73

7.4.10 User friendliness of KVATIS system ................................................................................................... 74

7.5 OTHER KEY STATISTICS ...................................................................................................................................... 75

7.5.1 VAT Helpline - effectives and support ................................................................................................... 75

7.5.2 Website details ...................................................................................................................................... 75

8 CHALLENGES FACED AND MEASURES TAKEN ............................................................................................... 77

8.1.1 Non-availability of digitized dealer data ................................................................................................ 77

8.1.2 Data Accuracy ........................................................................................................................................ 77

8.1.3 Resistance from stakeholders - employees ........................................................................................... 77

8.1.4 Digital divide among trader community ................................................................................................ 77

8.1.5 Digital Divide among officers ................................................................................................................. 77

8.1.6 Huge number of trading commodities................................................................................................... 78

8.1.7 Implementation of e-Payment............................................................................................................... 78

8.1.8 Multiple returns for the same period .................................................................................................... 78

9 AREAS OF IMPROVEMENT FOR KVATIS ....................................................................................................... 79

9.1.1 Technical Issues ..................................................................................................................................... 79


9.1.2 Refund Mechanism ................................................................................................................................ 79

9.1.3 Hardcopy submission ............................................................................................................................. 79

10 REFERENCES ................................................................................................................................................ 80

11 ANNEXURE .................................................................................................................................................. 81

Standard limitation - Restriction on use of reports

This report is intended solely for the information and use of the management of the Gulati institute of

Finance and Taxation (GIFT) and is not intended to be and should not be used by anyone other than

these specified parties. Ernst & Young therefore assumes no responsibility to any user of the report other

than GIFT. Any other persons who choose to rely on our report do so entirely at their own risk


Acknowledgement

The KVATIS Mission Mode Project holds great promise for the majority masses of the state as it aims at

streamlining the delivery of government services through online services. This is a one of its kind nation-

wide IT initiative initiated by Government of India (GoI) under the National e-Governance Plan (NeGP).

This was established for bringing a certain degree of standardization across states with respect to

Commercial Tax administration and to come up with streamlined citizen-centric, service-oriented

processes.

Ernst & Young Pvt. Ltd along with Gulati institute of management has done a collaborative study of the

impact of KVATIS on taxpayers, employees and the department. We would like to express its gratitude

towards all the government officials of Commercial Tax Department for their kind support and guidance

during the course of field study.

We would like to acknowledge, in particular, the contribution of the following officials for their extensive

co-operation, valuable insights and continued involvement:

State / Department Level:

Mr. Suman Billa , Commissioner, Commercial Tax Department ,Kerala

Shri. V.Murukesh Kumar, Joint commissioner (G), Commercial Tax Department ,Kerala

Mr. Thyagaraja Babu B.S, Assistant commissioner, IAC (CA), in-charge ITMC

Mr. VJ Gopakumar, Assistant commissioner 2 ,Commissionerate of Commercial Tax

Mr. V. Shyam Kumar, Assistant commissioner 1, Commissionerate of Commercial Tax

Mr. Murlidhara Prasad, Superindent A section, Commissionerate of Commercial Tax

Mr. Ajit.S, B 11 section , Commissionerate of Commercial Tax

Mr. Justin D, D 2 section, Commissionerate of Commercial Tax

Mrs. S.Valsala Devi ,Deputy commissioner, Thiruvananthapuram

Mr.B. Makheer lal, Inspecting assistant commissioner, Thiruvananthapuram

Mr.N. Murugan ,Inspecting assistant commissioner, Neyyattinkara

Mr.R.Shree kumar , Inspecting assistant commissioner, Amaravila

Mr.Ayubkhan.S.M , Assistant commissioner, spl. Circle, Vanchiyoor, Trivandrum

Mrs.Prathibha gnana Sundaram, Assistant commissioner, spl. Circle, Vanchiyoor, Trivandrum

Mrs. Sreekumari.L.S, Assitant commissioner, spl. Circle, Vanchiyoor, Trivandrum

Mr.A. Biji kumary amma, Deputy commissioner, Kollam

Mr.N.C. Chacko. Deputy commissioner, Ernakulam

Mr.P. K. Vijayalekshmi. Deputy commissioner, Thrissur

Mr.P.J. Jose Dalu, Deputy commissioner, Idukki

Mr.Mathew Thomas ,Deputy commissioner, Mattancherry

Mr.S.Sanal kumar Deputy commissioner, Kannur


Mrs. Pushpa K.A, Deputy commissioner, Kozhikode

We would like to extend our special thanks to Mr.Suman Billa IAS, Commissioner, Commercial Tax

Department, Kerala and Shri. A.V.Jose, Director, Gulati Institute of Finance and Taxation for their

continued support and guidance for this study

We would like to extend our thanks to Shri. V.Murukesh Kumar Sir, Joint commissioner (G), who ensured

a smooth take off for the project and relentlessly providing support in gathering the information‟s.

Our special thanks to Mr. Thyagaraja Babu B.S, Assistant commissioner, IAC (CA), in-charge ITMC and

each member of ITMC team for relentlessly providing support in gathering the information‟s.

Last but not the least; we take this opportunity to thank all the taxpayers, tax practitioners and employees

of Thiruvananthapuram circle, Kannur circle, Kozhikode circle, Mattancherry circle, Thrissur circle,

Ernakulam circle and Kollam circle respectively for enabling an informative interactive section to

understand the reach of KVATIS and its impact. Our special thanks to deputy commissioners and

assistant commissioners of each of the above circle for rendering their valuable time to facilitate the

survey which has enabled us to analyze the impact and reach of KVATIS. We also thank all sections of

the CTD department for providing us with the relevant data‟s and information‟s throughout our study

process.

The involvement and support of all these senior officials has enabled us to understand the expectations of

the project clearly. This will go a long way in defining the overall success of the project.

Team

Mr. Anand Hariharan, Manager, EY,India ,

Mrs. Swagata Basak, Senior Consultant, EY,India

Mrs. Dhanya Jose, Consultant, Ernst and Young Pvt Ltd

Faculty GIFT (Coordinator Dr.N.Ramlingam)


ABBREVIATIONS

Sl.N Acronym Expansion

1 AC Assistant Commissioner

2 Asst. Assistant

3 Ca chartered accountants

4 CAGR Compounded annual growth rate

5 CSDMS Centre for Science, Development and Media Studies

6 CST Central sales tax

7 CTD Commercial Tax Department

8 CTS Center for taxation studies

9 DC Deputy commissioner

10 Dy. Deputy

11 FY Financial Year

12 G2B government to business

13 GIFT Gulati institute of Finance and Taxation

14 IPT input tax credit

15 ITMC Information technology Management Cell

16 JC Joint Commissioner

17 KCTS Kerala Commercial Taxes System

18 KGST Kerala Goods and Sales tax

19 KVATIS Kerala Value Added Tax Information System

20 MIS Management information system

21 MMP Mission Mode Program

22 NeGP National e-Governance Plan

23 OPT output tax credit

24 SBI State Bank of India

25 SBT State Bank of Travancore

26 SLA Service level agreements

27 SSL Secured Socket Layer

28 STP sales tax practitioners

29 STQC Standardization, Testing & Quality Certification

30 VAT Value Added Tax

31 VCC VAT Consultative Committee

32 WAN Wide area network


1 Executive Summary

E-governance in Commercial Taxes Department, State of Kerala, India

Several government institutions have undertaken e-governance initiatives at multiple levels in the recent

past. With application of information technology to government processes, a strong and effective

information chain can be established that can help optimum resource utilization thereby leading to larger

economic benefits for the state as well as the community. Efficiency, transparency and accountability are

cornerstones of interaction with the government and crucial for improved service delivery that citizens and

institutions demand today.

In this report, we study the impact of an e-governance initiative by the Commercial tax department of the

state of Kerala in India called Kerala Value Added Tax Information System („KVATIS‟). The commercial

tax department administers various state taxes and accounts for more than 75% of the tax revenue

collected by the state catering to more than 1.7 lakh dealers in the state.

Our approach towards assessment

Our approach towards impact assessment of KVATIS comprised of quantitative and qualitative analysis

of inputs from internal and external service beneficiaries of the project which were the dealers, tax

practitioners and employees of the department. Sample size was chosen to be representative of the

population with 128 dealers, 156 tax practitioners and 200 employees. Further, dealers were stratified as

per different parameters such as mode of availing the services, area of operation, sector of operation,

commodity and region of operation. Structured questionnaires were pilot tested before administration of

the same to a larger audience. We have conducted random sampling and focus group discussions to

ensure more quality results from stakeholders.

1.1 Impact assessment of KVATIS- Commercial Tax Department

a. Increase in Revenue collection

The compounded annual growth of the

tax revenue collection is 17% over the

last 4 years.

The increase in tax collection is over

and above the economic downturn and

the increased base for each year.

0%

5%

10%

15%

20%

25%

2005-06 2006-07 2007-08 2008-09 2009-10

Pe

rce

nga

te g

row

th

Percentage growth in revenue collection


0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

2006-07 2007-08 2008-09 2009-10 2010-11 (Projected)

Increase in tax base

b. Increase in Tax base

The compounded annual growth rate

of tax base is 40% over the last 4

years.

The gap between the expected and

actual number of returns filed has

considerably reduced over the years.

The increased tax compliance is

owing to the availability of appropriate

MIS and other information‟s from

KVATIS system.

c. Interstate transaction

The compounded annual growth in

interstate transaction is 143% over the

last 4 years.

The availability of KVATIS system

enabled substantial data capture of all

interstate transactions

d. Trend in E-payment

There has been a drastic reduction in

offline payments over the last 2 years

and tremendous increase in online

payment.

The extent of e-payments is about

99%, the rest of offline payments can

be attributed to Compounding fees,

Payments against assessment, New

registration charges, Security deposits

etc

0

200000

400000

600000

800000

1000000

1200000

2006-07 2007-08 2008-09 2009-10

Inter state transactions

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

2008 2009 2010- April till September

Online Payment

Offline Payment


e. Fund utilization and trend in use of CSC in filing returns

The utilization rate for FY 2009-10 has

been very low, only 10.3% of the total fund

allotted for CSC‟s in providing services to

taxpayers has been utilized so far which

implies that the there has been a drastic

reduction in taxpayers availing the help of

third party agents for filing returns.

There has been a reduction of 27% in the

use of Akshaya Kendras in filing returns.

This can be attributed to the increase in

departmental assistance and user

friendliness of KVATIS system and hence

the increase in comfort ability of taxpayers in filing returns themselves.

f. Revenue collected per employee

There is more than 85% increase in the

revenue collected per employee both

including all cadres and for employees

who are directly involved in tax

compliance activities.

g. IT investments

The investments in hardware, software

and networking activities has been

considerably low (0.05%) with respect to

the amount of revenue collected by the

department

A large extent of investments is expected

in coming years for replenishing the old

systems in place, new set of servers for disaster recovery and additional computers for increasing

the extent of IT and computerization in the department.

0

10000

20000

30000

40000

50000

60000

70000

80000

Jan-March 2009

Apr-June 2009

July-Sep 2009

Oct-Dec 2009

Jan-March 2010

Nu

mb

er

of

retu

rns

file

d

Returns filed through AkshayaKendra

1.56

2.862.25

4.17

2005-06 2009-10

Revenue collected per employee

Including all cadre

Excluding all indirect contributors

0.09%0.08%

0.02%

0.06%

2006-07 2007-08 2008-09 2009-10

IT investment as a percentage of revenue collected


1.2 Impact assessment of KVATIS- Employees

There is 21.3% increase in number of files

scrutinized by the employees after the advent of

KVATIS

With comparable number of employees the

department was able to realize more revenue

by increasing the productivity of the existing

employees. There has been considerable

amount of trainings and investment made by

department to achieve the same.

Quality of work has improved with automation of

transactional tasks.

The valuable time of the employees can now be directed to more productive means like data

mining and other analysis like Input tax credit/ output tax credit etc which can be used to augment

the revenue collection and curb evasion.

More than 90% of employees expressed an increase in their morale and esteem attributed to

office automation and introduction of state of art technology.

The work load of employees on less–productive functionalities like maintaining voluminous

registers and tedious job of reconciliation etc have reduced tremendously giving ample time for

effective verification and scrutiny of the files thus enhancing the tax compliance.

Employees have reported considerable increase in workload mainly related to extent of scrutiny

and the increase in tax base.

The coverage of scrutiny has increased from 1 in 5 to 4 in 5, i.e. the effectiveness of scrutiny has

quadrupled over the four years from 20% to 80%.

All cases assigned to the official are to be scrutinized once in every 3 months, this is over and

above the increase in tax base of more than 40% over the last 5 years.

1.3 Impact assessment of KVATIS- Dealers and Practitioners

There has been a reduction of more than 50% in the number of visits made by the tax payer to

any of the nearby commercial tax office.

80 to 90% of the taxpayers and tax practitioners have agreed that the access to statutory forms

has made the process at ease as they no longer had to visit departmental offices to avail the

same.

There has been considerable reduction in the economic cost of transaction with the advent of

KVATIS

More than 80% of the tax practitioners and taxpayers have agreed that KVATIS has imparted

more discipline in the account management by monthly prompt and timely updation of accounts.

0

20

40

60

80

Before e-governance

After e-governance (KVATIS)

Number of files scrutinized/verified per month


This was enabled by increasing the control over their inventory stock and other normal business

aspects.

The magnitude of Z score at 99% confidence was used for analyzing the level of impact in each

of the dimensions. Supervision and promptness of updation of accounts was the most effective

aspect of KVATIS for dealers and practitioners. However as per dealers, there are not very

substantial change or impact in financial cost with the advent of KVATIS.

The clientele of practitioners experienced

an increase by more than 25%. This can

be attributed to the increasing tax base

and shift of tax payers from Akshaya

Kendras to tax practitioners. Shift of client

from Akshaya Kendras is owing to the

lack of technical competency and lack of

proficiency in the tax matter from CSC‟s.

All the parameters like high level of

computer literacy, any time assistance

form department via ITMC cell, VAT help

lines etc, the easiness of KVATIS system,

availability of proficient agents have made

an easy adoption of KVATIS for all tax

payers.

Dealers have rated direct awareness

programmes by the department through

word of mouth, training etc as the most

effective means. The direct interaction

has enabled the department to impart the

benefits of KVATIS system, the cost

effectiveness and ease of maintenance

and other governance factors. There was

frequent advertisement made in print

5%

66%

20%8%

1%

Percentage growth in number of clients

Zero or negative growth

Upto 25% growth

upto 50% growth

upto 75% growth

100% or More growth

Computer Literacy

21%

Availability of

proficient manpower

20%

Easiness of KVATIS System

21%

Departmental

assistance19%

Cost efficiency

19%

Factors - Adoption of KVATIS

Audio-visual Media 16%

Print Media17%

Online Services

18%

Handouts/ Pamphlets

14%

Helpdesk/Helpline

16%

Departmental

assistance19%

Awareness


media- both in regional newspapers and English newspapers to ensure the reach of awareness.

Practitioners have found online help/tutorials and Departments assistance as the factors which

have given them the remote support to move to KVATIS system.

The practitioners have rated human effort and financial cost and time spent to have increased

with KVATIS and this can be attributed to the increase in the clientele and the effort required in

filing a complete and accurate returns. Previously owing to the administrative and manual

processes, department could hardly check the compliance of all dealers within the limited time

Presently department has put restrictions on number of revisions in filing a return to ensure that

not much of bogus or window dressed details are fed into the system. Now if the returns are not

filed with adequate information and accurate details, the KVATIS system automatically generates

notices. . Hence it requires more effort for a practitioner to adhere to the rules and coherence of

information but the same is in-line with increasing the tax compliance.

Considerable amount of taxpayers have rated frequency of errors to have increased. Presently

system generated notices are generated for all kinds of formatting mistakes and other compliance

issues. Hence it requires additional effort from tax payers to ensure the adequacy and

consistency of data while entering the system.

The z-test has concluded that there has been a substantial impact in the service delivery standards and

levels with the advent of KVATIS. The Z-test was conducted at confidence levels of 90%, 95% and 99%

respectively. The positive result from higher confidence levels establishes that the impact is significant for

higher level of confidence.

The Department has been successful in taking the software application to the next level by making

appropriate measures to curb the challenges faced in the road of success. The support and planning of

the top level in strategizing the action plan‟s and phased manner of implementation played a major role in

ensuring the smooth transition of KVATIS application.

It was found that a next version of KVATIS can be released after considering the inputs from stakeholders

like chamber of commerce and other associations on the technical glitches to ensure the smoothness of

the process flow. It‟s also recommended that a digital signature/ digital certificate can be given to the third

party agents like Akshaya Kendras so as to enhance their role, control and discipline in the entire

working. The investments in IT need to be improved considerably in the coming years for recycling and

replenishing the old infrastructure. It was also recommended that a dedicated call center can be

established under commercial tax department with a person dedicated for handling 1 or 2 districts to

ensure the customer friendly assistances to the tax payers. Service level agreements can be established

to ensure the quality of services offered by departmental and call center assistances. It was also

recommended that digital signature be made available in the near future to reduce the dependency of

hardcopy submission made by the taxpayers presently.


The success of the story was by ensuring the commitment and acceptability from the part of the end

users in all the aspects of the project. There was proper hand-holding support provided by the department

to all stakeholders via online awareness programmes, tutorials, and departmental assistance to taxpayers

and via relevant training to the employees.

There are few areas of improvement as mentioned, however the overall rating of the KVATIS project has

been high. The analysis was mostly favoring the project owing to the aspects like drastic reduction in

number of visits to department, any time service, transparency and instant flow of information.


2 Introduction

Globally, Governments are the largest borrower and spender of public money. There has been increasing

pressure towards accountability and visible benefits from private sector, citizen and communities. Degree

of civic participation is accentuated by social, economic and technological factors e.g. rise in economic

growth and social factors such as literacy levels. E-governance is a means to increase these benefits and

enhance economic growth.

What is e-Governance?

According to the World Bank: (World Bank, 2008) E-Government refers to the use by government

agencies of information technologies - Wide Area Networks, the Internet, and mobile computing- that

have the ability to transform relations with citizens, businesses, and other arms of government. These

technologies can serve a variety of different ends: better delivery of government services to citizens,

improved interactions with business and industry, citizen empowerment through access to information, or

more efficient government management. The resulting benefits can be less corruption, increased

transparency, greater convenience, revenue growth, and/or cost reductions.

However, E-governance is more than automating forms, cataloguing of information and providing a

website for information dissemination and has its stages of evolution from basic computerization to online

interactive services to end customers. It can be a powerful catalyst to fundamentally simplify processes

and drive greater efficiency and effectiveness.

Broad interfaces that constitute e-governance are Government to Government, Government to Citizen,

Government to Business services. Public private partnerships have also been instrumental to deliver

some these services e.g. cover greater geographic area, deploy additional channel for citizen outreach

etc. Managed services providers can help governments focus on core competencies while outsource non-

core tasks to the private partner. Also, this marks a shift from disparate procurement of hardware,

software and services and managing the mix which can prove to be difficult over a period of time to a

more solutions and services based approach.

Impact of e-Governance in public service delivery

E-governance provides an opportunity to rethink processes, services and organization structure

to deliver them. This can potentially lead to significant reduction in paperwork, turnaround times

and streamline and standardize operations and undertake administrative reforms. Thus, there is

interplay of all the 3 factors of people, process and technology in a successful e-governance

implementation.

A proactive and service oriented government facilities more civic participation.

Greater transparency and accountability leading to a more cost-effective government


Better record keeping and documentation helps ease of access, information search and retrieval

Better knowledge management: Facilitate providing the right knowledge to the right people at the

right time. This enhances policy and investment decisions.

E-governance in India

E-Governance in India received an impetus with the introduction of the National e-Governance Plan in

2006. That India is being recognized as the leader in IT services implies that there are less supply side

constraints.

E-governance has been widespread especially in the revenue departments in India such as the Income

Tax department, state commercial tax departments, revenue departments of urban local bodies etc. E-

Governance initiatives has helped establish “voluntary compliance” as the cornerstone of revenue

administration by making it easy for taxpayers to comply and simultaneously helping the administration to

detect revenue leakage and take immediate action against non-compliance.

Commercial Taxes form the most important revenue base for the States and Union Territories in India,

often accounting for 60% - 70% of the total internal resources generated in India.

When value added tax was introduced in 2005 in India, maturity of VAT implementation varied across all

the states and a need was felt for streamlining various aspects of VAT administration.

The need for a Mission Mode Program (MMP) under Commercial Taxes was felt to establish a certain

degree of standardization across states with respect to Commercial Tax administration and to come up

with streamlined citizen-centric, service-oriented processes. It was in this context that the Commercial

Taxes MMP (CT-MMP) was conceived by the Government of India under the National e-Governance Plan

(NeGP).

It is against the above context, that we attempt to study the Kerala Value Added Tax Information System.


3 Approach and Methodology

The impact of KVATIS project was assessed by examining the difference in service levels before and

after the KVATIS project was augmented by the Commercial Tax Department.

It is assessed from the point of view of the various stakeholders of the KVATIS project namely the

Dealers/Traders, their designated agents such as Chartered Accountants/ Advocates/ tax practitioners

and the employees of the Commercial Tax Department. The cost, time, visits and files related dimensions

were measured directly while quality and governance related indicators were measured as perceptions on

a five point Likert scale, i.e. Interval based multiple choice scales.

There was an extensive measure made as part of the survey to collect structured feedback/

suggestions/areas of improvement, in addition to the impact of the computerized system. The additional

information was sought with a view to provide inputs for future evolution of KVATIS system The research

involved administering a structured survey to a systematically selected sample of different types of users,

and conducting focus group discussions to gain further insights into qualitative aspects of the project.

3.1 Sampling plan, Sampling size and Profile

The sampling number and profile was chosen to ensure that there was adequate representation of

various stakeholders across the Kerala state. The total sample population selected was 484.

The Survey was carried to access the responses from the three major stakeholder groups of this project

3.1.1 Dealers /Tax payers

The sample of nearly 128 dealers was derived by stratifying the entire user population on the basis of

each of the following parameters.

Figure 1. Taxpayers, Thiruvananthapuram


3.1.1.1 Mode of availing the services

The services provided by the department in terms

on e-filing, registration, e-payments etc can be

availed through various means. The taxpayer can

either avail the services directly from departments

through his own user-id and password or take the

help of agents like sales tax practitioners (STP‟s)

chartered accountants (CA‟s) or other Law Agents.

If the tax payer has difficulty in either of the above

means then he can go to the nearby citizen services

center called Akshaya Kendras in Kerala state and

avail the service free of cost.

Direct tax payers/ Self Payers

Who take the help of sales tax practitioners (STP‟s) chartered accountants (CA‟s) or other Law

Agents

Who avail the facility via Akshaya Kendras, The citizen service centers

3.1.1.2 Turnover of the business entity

Turnover is defines as the value of the total business

transactions.

Less than 10 Lakh INR

Between 10 lakh and 50 lakh INR

Above 50 Lakh INR

3.1.1.3 Area of Operation

Rural

Urban

6%

27%

67%

Turnover of the business entity

Turnover <10L INRTurnover INR >10<50LTurnover INR >50L

39

88

0

100

Rural Urban

Area of operation

60%

36%

4%

Mode of availing service

Direct tax payers/ Self Payers

Via tax practitioners (STP’s) /CA’sor other Law Agents

via citizen service centers


3.1.1.4 Sector of Operation

Manufacturer

Wholesaler

Retailer

Distributor/stockist

3.1.1.5 Commodity of Trade

Tax payers who trade in the below list of 10 commodities was shortlisted for the survey. The List of 10

commodities was arrived after aggregating various commodities and identifying the major business

commodities of the Kerala state. The white goods, electrical and electronic goods community were the

most diverse category and have ensured to include more samples to have appropriate representation.

Gold/Jewellery

White goods/ Electrical/ Electronic

Readymade garments

Rubber and rubber products

Iron and Steel/Hardware /Paint

Cement

Provisions

Motor Vehicles

Petrol/ liquor

Timber/Plywood/Glass/Hill Produce

3.1.1.6 Region

The main trade centers of Kerala namely Ernakulam, Kozhikode and Trivandrum were taken as primary

place of survey. To bring in the perspective of other districts a detailed field study was conducted at the

other districts and main centers namely: Mattancherry, Thrissur, Kozhikode and Kannur. The urban stint

in Trivandrum district was taken from Peroorkada, headquarters (Trivandrum) and Vanchiyoor.

Two rural circles of Trivandrum district was covered in the survey namely Nedumangadu, Neyyattinkara.

3.1.2 Tax practitioners

The sample of nearly 156 tax practitioners was derived by stratifying the entire user population on the

basis of region mainly the trade centers of Kerala namely Ernakulam, Kozhikode and Trivandrum. The

urban stint in Trivandrum district was taken from Peroorkada, headquarters (Trivandrum) and Vanchiyoor.

To bring in the perspective of other districts a detailed field study was conducted at the following districts,:

19%

31%37%

13%

Sector of operationManufacturer

Wholesaler

Retailer

Distributor/stockist

05

101520253035

Nu

mb

er

of

Pe

op

le

Commodity


Mattancherry, Thrissur, Kozhikode and

Kannur. Two rural circles of Trivandrum

district was covered in the survey namely

Nedumangadu, and Neyyattinkara.

3.1.3 Employees of the Commercial

Tax Department

The sample of nearly 200 employees was

derived by stratifying the entire employee

population on the basis of Areas of

Working namely Assessment wing,

Intelligence wing and Check post. The

other criteria of selecting employees was

based on regions i.e. employees from

main trade centers of Kerala namely

Ernakulam, Kozhikode and Trivandrum. The urban stint in Trivandrum district was taken from

Peroorkada, headquarters (Trivandrum) and Vanchiyoor. The other districts where a detailed field study

was conducted are Mattancherry, Thrissur, Kozhikode and Kannur. Two rural circles of Trivandrum district

was covered also in the survey namely Nedumangadu and Neyyattinkara

Figure 2. Tax practitioners


Districts/Regions Dealers Practitioners Employees

Mattancherry 12 14 30

Thrissur 23 21 27

Ernakulam 15 20 16

Kannur 18 24 22

Kozhikode 9 16 25

Kollam 16 22 21

Trivandrum ( Perrokada, Headquaters, Vanchiyoor) 23 17 43

Neyyatinkara/Nedumangadu 12 22 16

Total 128 156 200

3.2 Pilot testing and Validation of research instruments

Prior to the survey, the research instruments were validated. The first level of validation was done by few

eminent employees in the department from Assessment wing and intelligence wing respectively and

second round of validation was jointly done by experts from an autonomous institute under government of

Kerala and Higher officials of Commercial Tax Department.

The research instruments were tested with a pilot run of approximately 20 Dealers (Tax payers),

Practitioners and Employees each. The pre-test was conducted to verify the appropriateness and clarity

of the questions. The modifications were made in the questionnaire format based on the suggestions from

pilot run.


4 Kerala Value Added Tax Information System

4.1 About the Department

The Department of Commercial Taxes is the major source of revenue of the Government of Kerala,

accounting for 3/4th of its revenues. Commercial Taxes Department mobilizes major share of revenue to

the State of Kerala by focusing tax Laws compliance in the business community. The Department caters

to more than 1.7 Lakh of dealers (Tax Payers) registered under different central and state Acts of

taxation.

The organization of the Commercial Taxes Department comprises of five important wings and the

Commissioner is the administrative head of the Department.

Commercial Tax

Department

Tax

Assessment

Wing

Intelligence

Wing

Investigation

Wing

Internal Audit

Wing

Appellate

Wing

LAW

Wing

The Commercial Taxes Department consists of the erstwhile Agricultural Income Tax and Sales Tax

Department. The main activities entitled to Commercial Tax departments are registration of dealers,

collection of tax, recovery of arrears of tax, prevention and detection of tax offences under a series of

legislations enacted by the State and the Central Governments.

The Commercial Taxes Department administers the Central Sales Tax Act 1956, Kerala Surcharge on

Taxes Act 1957, Kerala Money Lenders Act 1958, Kerala General Sales Tax Act 1963, Kerala Tax on

Luxuries Act 1976, Kerala Agriculture Income Tax Act 1991, Kerala Tax on Entry of goods into Local

Areas Act 1994 and The Kerala Value Added Tax Act 2003.

The geographical coverage includes the State Head quarters at Trivandrum and other 15 District Head

quarters. There are around 431 Commercial Tax Offices, which includes 221 assessment circles, 74

Check posts, 75 Enforcement Squads, 16 Investigation Wings, 1 Appellate Tribunal. These are

geographically distributed across 14 revenue districts. There are a total of 4615 Employees catering 1.70

lakh dealers.


4.2 Need for implementation of KVATIS

The services provided by Commercial Taxes Department were all manual and paper based. The below

diagram depicts the kind of interactions /transaction which used to be present previously.

Commercial Tax Department

Return Filling

Ba

nks

CT

D O

ffic

ers

Cle

rks

De

ale

rsT

rea

su

ry

Filled return form

Return form

Purchase statement

Sales statement

Calculates the Tax

Remits the amount

to Government

Account

Goes to office to

get the payment

Challan (4 copies)

Challan

Inward Register

Submits the Filled

forms and

payment challan to

department

Enters the required

information to the

corresponding registers/

System

Verifies the returns

filed and initializes

the same

Return form is

given back to

citizen for

appropriate

corrections

A

A

The returns are

accepted, Credit is

given to the tax

payer

No

Yes

A serial number is

given for each

challan

Daily collection register

Cheque Register

Assessment register

Goes to treasury

to get the

payment

Challan sealed

Citizens goes to

Bank to remit the

amount

Inward

Register

No

Verifies the returns

filed and initializes

the same

The dealers had to do the following tasks before the KVATIS system was operationalised-

Preparing separate return forms for different acts such as VAT, CST and KGST.

Tabulating input tax credit (IPT) /output tax credit (OPT)/ Reverse tax /Special Rebate & Net tax

Payable.

Frequent visits to CTD office

To receive Challan/official receipt of payment.

To get signature of CTD officer

To submit return

To collect statutory forms

To receive acknowledgment


Visit to Treasury /Bank:

To treasury for affixing office seal on challan

To bank for remittance and receiving challan

With respect to Officials of the Commercial Tax Department, the following were the office tasks before the

operationalisation of KVATIS System

Maintain the uniformity in commodity name in the return and verifying the correctness of

commodity classification and hence eliminating misclassification of tax rates

Officials had to ensure that previous returns have been filled appropriately

Maintain large number of voluminous registers and accounts like daily collection register,

assessment register, dealer Ledgers etc

Manual posting of return and collection details in the assessment register

Manual cross verification of Sales / Purchases invoices

Dealer-wise sorting of Check Post declarations

Filing the Declarations in the assessment records

Cross matching the Declarations manually

Preparing commodity group-wise collection report

Monthly reconciliation with treasury

The registered dealers had to file periodic returns at the Assessment office of the Commercial Tax

Department in a prescribed format along with the detailed enclosures of purchases and sales invoices

effected during the period of consideration. Each had to file separate returns under the following Acts like

CST, VAT and KGST. Based on the tax rates and other details, the dealers have to work out the net

taxable amount. At-least 6-7 visits to CTD offices was inevitable for tasks like submission, to receive

challan, statutory forms, for signatures etc. the dealers had to visit Treasury to get the serial number for

their challan and then had to visit the banks to remit the tax to Government account.


The payment procedures

Commercial Tax Department

Payment Process and Procedures

CT

D O

ffic

ers

/

Cle

rks

Ba

nk

Tre

asu

ry

Monthly

reconciliation of

Daily collection

register and

Treasury

Registers

Sends the copy of

challans to the

Department

Does the

Mapping of

Challans to

respective Files

of the dealer

Collects the

challans from

treasury, Enter

the books of

account and

registers, Dialy collection

register

Cheque Register

Assessment

register

Payment is

remitted to

Government

Account

Enters a serial

number to each

of the challans

Monthly

reconciliation of

Daily collection

register and

Treasury

Registers

Monthly

reconciliation of

Daily collection

register and

Treasury

Registers

4.2.1 Dealers perspective

A dealer had to make at-least 6-7 visits to office in the process of tax remittance.

1. They had to obtain the prescribed challan forms from the assessing officer countersigned.

2. Visit the treasury officer for affixing remittance sequence number on the challan

3. Remit the taxes at the nearest tax collection bank

4. Submit the triplicate copy back to the assessing officer for accounting in the case of direct remittance.

The other means of payment was through demand draft or cheque. While availing these payment options,

the credit was allowed only on receipt of the original challan from the treasury. The delay was around a

week‟s time.

4.2.2 Department’s perspective

The Officers had to deal with large number of people who have to collect forms, to get signature etc. The

clerks had to visits treasury to obtain the details of transactions and enter the results in voluminous

registers like daily collection register, assessment register etc. The respective files and challans had to be

posted on to the dealers files. On a monthly basis the huge task of reconciliation was carried by two


officers of the department and cross checking the entries made by treasury. The major problem faced

owing to the procedural dependencies was missing credit/ challans.

4.2.2.1 Check post Operations

The transporters submit declaration of goods transported in a prescribed format along with copy of the

consignment documents. The Interstate consignments undergo inspection at the commercial Taxes

border check posts.

Dealers having inter-state trade have to furnish returns separately under CST Act. The transporters

submit declaration of goods transported in a prescribed format along with copy of the consignment

documents. The documents are sorted and transferred to the assessing officer periodically for

accounting. Advance Tax is collected at check posts for certain listed evasion prone consignments. The

number of interstate consignment vehicles comes to 1,800,000 per annum with an average of 4

enclosures per transaction. The Interstate Consignment transactions could be verified when transaction

documents from check posts are available

4.2.2.2 Input Tax Credit

The dealers are eligible for Input Tax credit on the purchases effected from registered dealers within the

state. The respective net tax payable was calculated by deducting the input tax credit for the respective

month from the output tax collected. There used to be a delay in Commercial Tax department officers to

accept and allow the input credit to the dealers. It was difficult for officers to verify the genuineness of

input tax claimed by the dealer. This was owing to the lack of proper information system whereby timely

availability of relevant information was difficult. Usually the officers were constrained to accept the returns

without an effective scrutiny or cross verification of purchases with the corresponding sales.

4.2.2.3 Misclassification of Commodities

As per VAT rules, the commodities are classified under various tax rates namely 12.5%, 4%, etc. To

evade payment of tax, the dealers were found to willfully classify 12.5% taxable commodities under 4%

commodities. To ensure the effectiveness of scrutiny the department had to deploy 800- 1000 officers for

the assessment.

4.2.2.4 Paper based processing

Owing to manual paper based processing, timely data sharing among different offices was very difficult.

The report generation and MIS was difficult to gather and required huge man efforts. Proper data mining

and business intelligence was not possible to enhance the effectiveness of tax collection.

4.2.2.5 Discretionary powers

The dependencies on Commercial tax officers had loopholes where in the officers can use their

discretionary power for falsifying the facts. This opaque system of approach gave way to corruption and

other malpractices within the system.


4.3 KVATIS

KVATIS (Kerala Value Added Tax Information System) is the software system developed and deployed

by the department to facilitate tax administration of VAT in Kerala state. KVATIS is accessible at

www.keralataxes.gov.in. The software provides an Internet web based application for public interface

which is accessible to all registered dealers & transporters. The Intranet application is accessible only to

the employees of the Department and is accessed through Wide area Network (WAN). KVATIS intranet

application was developed and deployed during 2007. The project became operational on November

2007.

KVATIS was part of the a Commercial Taxes Mission Mode program which aimed at the creation of a

National Infrastructure for facilitating inter-state trade, ensuring uniformity and standards in the

Commercial tax administration and enabling free exchange of information. It was a project initiated as

State Mission Mode Project (MMP) in tune with the National e-Governance Plan (NeGP).

4.3.1 Software Modules

The dealer registration module which deals with registration of a dealer, issue of certificates &

permits, its renewal, cancellation, suspension, amendment etc.

The returns module deals with filing of return, details of payment, defaulters, enclosures,

verification, etc.

The check post module deals with details of vehicles, consignor – consignee, goods, verification,

seizure, auction, transit pass and transport permits etc.

The tax accounting module deals with the payment transactions, treasury, cheques, cash, scroll

capture, verification, and reconciliation & ledger.

The enforcement module deals with complaints, investigation, vehicle checking, detention of

goods, inspection of shops, security, auction etc.

Other major modules deals with functions related to penalty and offences, audit assessment,

appeals and revisions, recovery, refunds and employee information.

The below diagram depicts the flow chart for filing of return with the advent of KVATIS System.

http://www.keralataxes.gov.in/


Tre

asu

ryD

ea

lers

KA

VT

ISC

TD

Offic

ers

Ba

nk

Login to KVATIs

System ( End of

Month)

System Calculates

Tax amounts and

automatically route

to the bank site for

payment

Fills in the relevant data

in the prescribed online

format

Purchase invoice

Sales invoice

Uploaded into the system

Account wise/

Head wise E-

payment is done

Submits the

Application online

System does the

reconciliation of

accounts based on

bank scroll and

Treasury serial

numbers

Statement on a daily

basis

Bank Scroll is send to

Treasury /CTD

Treasury inserts

serials number of

the transactions

and send back to

Department

Citizen receives the

system generated

challan with serial

number from

Treasury

( after 2 days)

Real time transfer

of money

Bank Scroll is

received on a daily

basis

Bank Scroll is

received on a daily

basis and uploaded

in KVATIS

KVATIS

automatically

generates the

Challan Acknowledgement

Updates challan with

serial number from

Treasury

Verifies the entries and

credit is given to the tax

payer

4.4 Objectives and Goals of KVATIS

The vision of KVATIS Project is “to ensure effective tax administration by co-ordinating the stakeholders,

thereby contributing significantly to the State‟s development”. The main objectives for which KVATIS

system has been started are

To increase/accelerate the tax collection and to augment the tax compliance and hence improve

the tax administration at the department under the constraints of human resource.

To reduce the hardship of the taxpayers

by reducing the interface between the officials and the trading community

By eliminating the physical presence and restricted timings to service access.by creating a user-

friendly atmosphere/environment conducive for tax compliance. By simplifying the processes and

by ensuring dealer participation in tax governance. By reducing corruption and by ensuring

effective coordination.

The system also augments that timely delivery of service is given to stakeholders. Indirectly the system

aims to brings in a more sense of accountability to each of the stakeholders and transparency of process

Finally it‟s also envisaged to assist the department offices in detecting tax evasions made by the dealers

using various modes of operandi and hence ensuring greater tax compliance.


4.5 Achievements / Outcomes of the project

The benefits of the project can be looked at from the two main dimension of service provider i.e. the

commercial tax department and the service beneficiary i.e. the dealer.

4.5.1 Dealer’s perspective

The benefits from the dealer‟s perspective can be summarized under the following heads:

4.5.1.1 Ease of access through simple & transparent process

KVATIS meant there was relief from the long queues at offices, for the submission of returns/ tax

remittance. Instant credit of the Tax amount due, from dealer‟s account or dealer authorized account, to

the Government account and thus faster realization of funds

4.5.1.2 Reduced cost of compliance

The need to visit to tax office, wait in long queues and restricted timings for submission of returns is totally

avoided by electronic filing system. Extended e-filing services through citizen service centers in his/her

locality free of cost reduced the cost of compliance. Also, tax payers are relieved of service charges

availed by the Banks for Demand Drafts, cheque clearance, etc.

4.5.1.3 Reduced paperwork

Dealers need to file single integrated, simplified return under different Acts of the state government,

reducing the preparation effort. Errors resulting from manual tabulation of Input Tax credit, Output Tax

Reverse tax, Special Rebate and Net tax payable are averted by electronic filing. Completeness is

ensured prescribing standards and educating traders. Dealers are provided facility to prepare sales &

purchase invoice details offline and upload the same electronically. Return accounting registers are

generated electronically by the system.

Also, KVATIS meant that process of collection and manual reconciliation of instruments could be avoided.

4.5.1.4 Avoids office visits

e - Payment facility helped the dealers to remit the taxes instantly without having any effort for document

preparation or multiple department visits for remitting tax. Tax due is automatically computed and

electronically transferred to Government account integrating Banks and Treasuries. The dealer is able to

verify his tax dues and payment credits instantly on submission of returns. Reconciliation previously done

decentralized with extensive manpower in collecting challan documents from banks and treasuries and

cross verification with the Accountant General, which took several months to complete is now centralized,

automated with little human intervention and completed in the same month. No missing credit to dealers

since the project is implemented. Dealers could use either their existing bank account or an authorized

account or from a new zero balance account opened for e-payment. Tax accounting is automated and

maintained by the system. The Department is able to instantly ascertain tax revenues. 100% of the

dealers avail e-payment along with e-filing.


4.5.1.5 Instant acknowledgement

Instant acknowledgement is provided on return filing which can be subsequently tracked by the dealer

leading to greater transparency. Dealers can also verify the status of the e-payment anytime.

4.5.1.6 Instant e-Challan

The system generated e-challans can be taken by dealers on a real time basis. The e-challan will be later

updated with treasury serial number and the dealer can downloads the same from KVATIS system after 2

days.

4.5.1.7 Faster clearance at check post

Dealers could electronically declare interstate consignments and avail faster clearance at check posts,

make e-payment of advance tax. Delay in check post clearance reduced to 20 minutes from an average

of 3 hours especially for export consignments and fast moving consumer goods. The check post

consignment transaction is immediately accounted in the dealers portfolio maintained at the assessing

office. Annual registration renewal is facilitated on-line without office visit.

4.5.1.8 System generated annual return

System generates the tax due as per return. After successful payment of the tax, system would

automatically submit the return avoiding disparate processes for return and tax filing.

4.5.1.9 Reduced corruption

With reduced discretionary powers to government officials which could potentially be misused, avenues

for corruption have been significantly reduced.

4.5.1.10 Faster availability of statutory forms

Dealers avail electronic download facility for statutory forms to avail tax concessions for interstate

consignments without the need to visit CTD office.

4.5.2 CTD’s perspective

4.5.2.1 Benefits from paperless office

With the introduction of KVATIS, office space occupied by the paper documents has reduced by 40%.


Figure 3. Storage - Paper based system

Figure 4. Office automation- Less storage space

4.5.2.2 Increased tax base and compliance rate

Registration has grown from 1 lakh to 1.72 lakh with introduction of KVATIS. e-Filing enabled the

department to effectively and easily conduct return electronic scrutiny. E-uploading of invoices meant that

system is able to build unaccounted invoices. Scrutiny rate enhanced from 20% to 80% within a span of 1

year. Compliance level has improved from 50% to 90% The Department could achieve a regular annual

growth of 20 – 25% in tax collection even in the period of recession by ensuring transparency,

accountability and responsiveness. Proper record keeping has helped compliance e.g. interstate statutory

forms issued by the state helps check fraudulent interstate transactions


4.5.2.3 Instant credit of Tax

Instant credit of Tax meant that cash is realized faster by the government

4.5.2.4 Relief from the manual process

Automation of basic manual processes helped increased the efficiency and productivity of employees.

Employees could process 63 number of transaction compared to 49 earlier.

4.5.2.5 Databank of dealer to dealer transactions

Relevant details of the dealers are maintained and can be easily searched and retrieved by the

commercial tax department

4.5.2.6 Refund verification made easy

Dealer ledgers and visibility of input and output tax of dealers means refund claims can be verified easily

4.5.2.7 Avoids treasury reconciliation

e-Challan provides the Bank Reference & Treasury Sequence numbers. Also, real time Cyber Treasury

Receipt is provided from the bank online. This meant that lengthy process of treasury reconciliation is

streamlined with help of KVATIS.

4.5.3 Awards and recognitions

State e-Governance Award for Best Utilization of Akshaya – 2009 for maximum utilization of

Citizen service providers, Institute of Management in Government

State e-Governance Award for e-Payment Services – 2010, for best e-governance award for

enabling e-payment services, Institute of Management in Government

e-India 2010 Awards for e-Tax Administration – 2010, Government to Business – Initiative of the

Year – Jury‟s Choice” for the “E Tax Administration Programme”, E India awards are organized

by the Centre for Science, Development and Media Studies (CSDMS) and the Department of

Information Technology, Government of India to recognize excellence in IT initiatives.

CSI Nihilent Awards for e-Tax Administration – 2010, in the category of Progressive e-Governed

State

These awards are a testimony to the world class and cutting edge initiative. These awards also depict

the progression CTD, Kerala has made with respect to other states.


4.6 Geographic and functional coverage of KVATIS

KVATIS Application is accessible across all the 431 department offices spanned across the 14 districts of

the Kerala State.

KVATIS was designed for operation with a central data centre along with web-browser client architecture

accessible over internet. The system is made easier to implement, access, and use.

The department has implemented the following e-Services under the e-Governance program:

S.N Services/Milestones Milestones timeframe

1 e-Filing of return January 2009

2 e-Uploading of invoices January 2009

3 e-Payment of tax September 2009

4 e-Payment of Advance Tax January 2010

5 e-Downloading of statutory forms January 2010

6 e-Consignment declaration January 2010

7 e-Renewal of registration April .2010

8 e-Uploading of Stock Inventory April 2010

4.7 History of Evolution

Computerization of the Commercial Taxes Department was initiated in the year 1998, when the

government decided to implement a comprehensive Kerala Commercial Taxes System (KCTS) under the

regime of the General Sales Tax Act. During the period from 1998 till the year 2005, KCTS went through

various phases of implementations. Subsequent to the introduction of the Value Added Tax legislation,

the KCTS initiatives were finalised.

A fast-track implementation of the Kerala Value Added Tax Information System (KVATIS) was undertaken

by the Commercial Taxes Department in the year 2005, incorporating business processes under the new

legislation.


4.7.1 Phases of Implementation- Milestones

The implementation of KVATIS project was planned in a phased manner.

4.7.1.1 Initial Phase

The initial phases of the project were to provide a backend facility to switch over the functionalities of

registration and check post transactions as and when the KVATIS software was ready. It was aimed to

digitize the dealer‟s trade particulars by the in-house team when software provider M/s CMC Ltd. will be

closing the software modules. The connectivity between officers was established by M/s Frontier Ltd. The

parallel track of software development, the connectivity establishment and digitization enabled a fast

switch over to KVATIS system. It was later planned to digitize the periodic returns and enforcement

operations. The strategy adopted was to begin the process by digitization of backlog returns off-line in a

decentralized manner from all assessment offices. Parallely the return for the current period was also

digitized. It was later converged to the single database.

4.7.1.2 Second phase

The second phase of the project is to enable electronic return filing facility with automated tax calculation

to the dealers. This was achieved through a staged approach.

Dealer registration and digitization of the dealers particulars

Checkpost Transactions

Digitization of backlog returns off-line

Electronic e-filing and e-uploading of invoices

Stage 1. Taxpayer above 50 Lakh turnover

Stage 2. Above 25 lakhsturnover

Stage 3. Mandatory to all registered dealers

e-Payment and electronic scrutiny

E-downloading of Statutory forms

E-payment of advance tax

e-Declaration facility for interstate consignments

e-Renewal of registration

e-Closing stock upload facility

e-Audit reports

Till 2008-09

2008-Jan 2009

September 2009

January 2010

April 2010


1. All major tax payers having an annual turnover of 50 Lakh and above were mandated to move

to e-filing facility. The dealers were able to prepare the return and enclose the required invoices

along with the return and upload the same.

2. In the next stage all dealers with annual turnover of 25 Lakh and above was included in the

mandatory e-filing group.

3. Finally all the remaining dealers who are registered and having a turnover of more than 5 lakhs

was mandated for e-filing.

4.7.1.3 Mode of availing services

Dealers can e-file periodical returns from any place at any time through the internet. Those dealers

having the facility of Internet can file their returns by accessing the official website

www.keralataxes.gov.in. Whereas, those dealers not having the facility of Internet can file their returns

either through Akshaya e-Centers or through any authorized centers, free of cost. Presently, 1178

Akshaya Centers are authorized for providing e-filing service to VAT dealers. The Government is paying

Rs.25/- per return to these Akshaya Centers, towards the expense of e-Filing. Trade Organizations & Tax

practitioners are also considered as Authorized Centers for e-Filing.

While e-filing the return, dealer has to upload dealer to dealer Purchase and Sales Invoice details into the

system. The data so received, enable the department to generate various analytical reports and to

perform Scrutiny. Computerization and e-filing of return augment revenue collection by curbing tax

evasion and increasing tax compliance.

4.7.1.4 Third phase

The third phase was to introduce e-payment facility and e- declaration facility. The e-payment was to

enable tax payment by the integration with banks, treasuries and the department. All dealers were

mandated to avail e-payment facility. E-payment was facilitated by integrating the commercial taxes web

application with the Bank‟s website (State Bank of India and State Bank of Travancore). The Government

has accorded sanction to 11 other banks also, for providing e-payment facility for remittance of

Commercial Taxes, and Reserve Bank of India has approved 7 banks. The extension of facilities to new

banks is pending with Department head office and will be commissioned in the near future. In order to

facilitate e-Payment, more than 7500 commodities were grouped into 314 commodity groups. Necessary

amendments in the Kerala Treasury Code, VAT Rules, CST Kerala Rules and KGST Rules were

incorporated to facilitate e-payment. The e-Declaration facility was introduced for interstate consignment

transactions.

Since the tax payers had to file returns differently under different acts, the VAT, CST and KGST returns

were integrated to facilitate better service to all categories of dealers.

http://www.keralataxes.gov.in/


When the consignment enters the State Border, there had been instances of evasion in tax payment in

certain commodities at the border check post. To curb this evasion the e-payment mechanism was

extended to a new facility of Advance tax payment.

The system was further improved by providing facilities to conduct electronic scrutiny of returns by cross

verification of transactions among dealers. While e-filing the return, dealer has to upload dealer to dealer

Purchase and Sales Invoice details into the system. The VAT-Log, a trail of transactions, enabled the

department to scrutinize the genuineness of input tax claimed by the tax payers.

4.7.1.5 Fourth Phase

The fourth phase was to provide online- download facility of statutory forms given below through KVATIS

for availing tax concessions and thereby prevent bogus concession claims.

C form, for interstate sale of goods,

E-I and E-II for sale during movement of goods by transfer of documents,

F forms for branch transfer of goods,

H forms for sale during course of export

The system of issuing blank statutory forms in advance and in person was discontinued. The dealer no

longer has to visit the circle offices for obtaining the supply of the forms. This initiative has been

mandated to all tax dealers and the system has been designed in such a way as to download the form

instantly provided the transaction invoices are uploaded along with periodic returns. An option to capture

statutory forms utilization data is also provided.

4.7.1.6 Current Phase

In the current phase facilities like e-renewal of registration, e-closing stock upload facility and e-audit

reports upload facility has been introduced. The objective is to ease assessment, compare the profitability

and gross margins adopted by the dealer etc. This module is still in progress.

Sl.N Particulars Current participation rate

1 Digitization of tax payers information 100%

2 Check post transaction through intranet 30%

3 Digitization of backlog returns 50% with regard to returns

10% with regard to enforcement

operations

4 e-filing of returns 100%


5 e-payment 100%

6 e-declarations 5%

7 Advanced Tax payment 100%

8 Online- download facility of statutory forms 100%

9 e-renewal of registration, 100%

10 e-closing stock 100%

11. e-audit (Upload audit report) Operationalised

The e-declaration facility was introduced very recently and requires more awareness and familiarization

for all stakeholders about the advantages and potential offered by the module. The department has plans

pipelined to provide adequate training and awareness programs in this regard to improve the participation

rate of newly introduced modules of KVATIS.

4.8 The visionary’s of KVATIS- the Top Management

KVATIS was the novel attempt to incorporate e-Governance for G2B services in the Kerala State. The

key dignitaries who made this project reality are: Mr. V.Somasundaran IAS, Commissioner of Commercial

Taxes initiated the project, Mr. Paul Antony IAS conceptualization, design, and implementation strategy.

He strategized the process re-engineering and re-structuring of the department to embrace e-

Governance. The strong leadership and ownership exhibited has laid the foundation to Kick- off the e-

Services. The initiative was very further enhanced and well lead by the next successor Mr. P.Mara

Pandian IAS. During his tenor the e-Services like e-Returns, e-Payment, e-Declaration, e-Forms and e-

Registration were started. Mr. Suman Billa IAS, the present commissioner is currently championing the

project and has contributed e-Stock and e-Audit to the list of services. Steps are initiated for additional tax

revenue mobilization by exploring the information‟s available within the system through data mining.


4.9 Stakeholders

4.9.1 Technical Committee

The Government of Kerala constituted Technical Committee consisting of IT experts from Industry,

Government, public sector and domain experts from the Department. The advice of the Technical

Committee was taken in key decisions regarding the project.

4.9.2 IT Management Cell

The Department constituted IT Management Cell consisting of technical members from within the

Department to monitor the progress of implementation of the project, its administration and Change

Management. IT Management Cell performs the key aspect of co-ordination of the various entities

involved in accordance with SLAs and ensuring the stakeholder participation. The IT Management Cell

functions in close association with the Department leadership. System Administrators are deployed in 14

districts to administer district level project implementation in close association with administrative heads.

4.9.3 Gulati Institute of finance and taxation (GIFT)

Previously known as center for taxation studies (CTS), GIFT is an autonomous institution constituted by

the Government of Kerala in 1992 .The institute being an independent unit working closely with

commercial tax department had provided inputs in matters related to statute formulation of KVATIS,

training, and policy inputs through studies and projects. GIFT has also been a facilitator of training by

providing infrastructure and other logistics for training facilities.

Stakeholders

Govt of Kerala

Commercial Tax

Department

Dealers

State Tax practitioners/CA

S/Law

software/Hardware/Network

Vendors

CTS/GIFT

KSITM

Vat Consultative Committee

Akshaya Kendras(CSC)


Role of GIFT

Conduct training programmes on Kerala Value Added Tax Statutory Forms , Newly recruited

commercial tax officers , KVATIS acts and rules, system administrators etc over the years.

Works as a catalyst to enable KVATIS software of commercial tax department to effectively reach

the intended target stakeholders.

Conduct seminars on Commodity Classification and release of Commodity Finder Book and Work

shop on Model Format on Chartered Accountants Audit Statements for the State Value Added

Tax

Has published books on Value Added Tax (VAT)

4.9.4 Software /Hardware and Network Vendors

4.9.4.1 M/s CMC Ltd

CMC is the software vendor and developer of KVATIS Project. The company has worked hand in hand

with the Department by deploying their development teams at the head quarters ensuring the availability

of support any time during the development phase. The maintenance of the software is also undertaken

by the company.

4.9.4.2 M/s HCL Ltd

The supply and maintenance of client workstation PCs is handled by M/s HCL

4.9.4.3 M/s Frontier Systems

Responsible for implementation and maintenance of the Wide Area Network connecting 431

geographically distributed offices through the Kerala State Wide Area Network Infrastructure.

4.9.5 Kerala State IT Mission

The Hardware for servers and necessary Operating system were co-located at State Data Centre

Infrastructure Setup by Kerala State IT Mission and owned by the Kerala Government.

4.9.6 VAT Consultative Committee (VCC)

VCC consists of members of Chamber of Commerce, traders associations who represent the major

stakeholders actively participated in the project. Each stage of implementation is consulted with the VCC

suggestions are considered while implementing. The significant changes are implemented only after due

consultation.

4.9.7 Akshaya Kendras

The citizen service centre, an entrepreneurship project in association with IT Mission, coordinated with

the Department in delivering electronic services through 1187 Akshaya centers.


4.9.8 Dealers

Any person who carries the business of buying, selling, supplying or distributing goods, directly or

indirectly, for cash or for deferred payment, or for commission, remuneration or other valuable

consideration and who are registered with Commercial Tax Department.

4.9.9 Sales Tax Practitioners /CA’s /Law Agents

The sales tax practitioners are agents/ representatives of the Dealers (Tax payers) and help them in

maintaining the sales and purchases accounts of the entity. They are legally registered agents.

5 Implementation framework

5.1 Capacity building initiatives

5.1.1 Training Initiatives

To enable a smooth flow, extensive training programs were conducted for each of the stakeholders of the

KVATIS project. The stakeholders trained are dealers, Sales Tax Practitioners and officials of the

department from assessment wing and intelligence wing, also district coordinators.

There have been continuous training programs conducted by the department with the help of system

administrators and system supervisors identified. The Software development team M/S CMC Limited

also helped department in imparting the training.

The in house training was provided at department‟s 4 computer labs located at Ernakulam,

Thiruvananthapuram, Palakkad and Kozhikode respectively. Various trainings were provided to State Tax

Practitioners (STP‟s) through organization like Indian Chamber of Commerce etc.

5.1.2 Investments on Training

Training details Amount of investment (Rs. In Lakh)

Initial phase 5,200

Follow on Trainings 20

Follow on training was given to CTD officers and Assessment clerks in April 2010. The content included

aspects on improving employee awareness and imparting better understanding of system processes,

cross verification, return scrutiny and check post verifications etc. The training was conducted for 3 to 4

batchers with each 100 participants for one week. There have been continuous training programs by


system administrators of the department to other divisions of the department like intelligence wing and

assessment wing.

Four day training was conducted for the call center employees by the information management cell

(ITMC) staff on areas related to frequently asked questions in KVATIS and other Process Manual related

queries.

Fourteen days training was given to employees of Akshaya Kendra, the citizen service centers across the

14 districts of the state. Training was also imparted to all district coordinators and employees from

assessment wing. The contents for training ranged to general understanding of KVATIS system to

detailed process flow, and administrative details. Various user manuals have been prepared on e-

payment, E-filing, Trouble shooting and general tutorials.

Details of training provided by GIFT over the last 5 years

Year. Name Of The Programme Cadre Of The Officials

Trained

No. of

Batches /

Days

Total

Particip

ants

2005-06

Training on Kerala Value Added

Tax Statutory Forms

Asst. Commissioners,

Commercial Tax Officers,

Inspectors & UD/LD Clerks

36 2537

2006-07 District Level Training on KVAT

Forms

Asst. Commissioners /

Commercial Tax Officers 10 650

2006-07 Training on Works Contract Panchayat Staff 1 180

2006-07 Direct CTO training on KVAT

Act & Rules Commercial Tax Officers 2 90

2006-07 Works on VAT Forms

Restructuring

Dy. Commissioners / Asst.

Commissioners & Faculty,

CTS

14 15

2006-07 Head Quarters Staff training on

KVAT

Superintendent, Head

Clerks, U.D. Clerks 1 60

2006-07 Computer Training / KVAT

Software Training

Asst. Commissioners /

U.D/LD Clerks 42 680

2007-08 Training on KVAT Software etc. Selected officials from

different cadres 18 648

2008-09 Training for System

Administrators System Administrators 3 110

2009-10 Training on e-filing of VAT

returns

Assistant Commissioners &


2009 Training for Intelligence officers

All officers of Intelligence

wing 12 360

2009 Training for Check-Post Officials All Check post officials 9 270

2009 Training on e-filing of VAT

returns

Assistant Commissioners &



5.1.2.1 Trainings planned

The department has been actively investing in continues training programs. Timely training has been one

of the sole reasons which made KVATIS success. The department has planned for a next phase of

training for 900 officers across state on providing Hands on experience on assessment and access of

MIS in the system. The department has also planned training for all typists (about 150 candidates) in the

department so as to make them direct contributors in the KVATIS.

5.1.2.2 Methodology and approach of training:

A class room based training methodology was adopted for training and each session consisted of both

theory and practical sessions. To ensure the effectiveness, session were done on real time case studies

from assessment.

Train the Trainer, one of the most scalable and cost effective mode was the approach used for training.

The system administrators and system supervisors were trained by the software system developers of

KVATIS who in turn trained the sampled crowed from various districts.

The content for training was finalised after due interaction with the dealers and employees. The training

covered all the detail pertaining to e-Services, mainly the process flow and procedural details.

5.1.2.3 Training Review

Review studies are conducted every 3 months from the commissionerate to understand the effectiveness

of the training imparted. Each employee was asked to present a case to elaborate how each case were

scrutinized and verified.

5.1.3 Investments in IT

There has been considerable shift in investments in hardware and software investment over the years.

Considerable amount of 0.07% of the revenue collected by the department was kept aside for hardware

capacity building and software development during the starting of the project (FY-2006-07). As the

system was stabilized there has been moderate level of investments in the subsequent years. In year

2009-10 about 0.02% of the revenue was allocated for capacity building. Over the four years 82,800,212/-

Rupees was spent on building hardware capacity and Rs 58,985,995/- on software developments.

5.1.3.1 Hardware Investments

Expenditure 2006-07 2007-08 2008-09 2009-10 Total

Hardware Purchase for Data Centre

25,977,159.18 4,401,322.02 1,003,620.00 7,200,000.00 38,582,101.20

Hardware Purchase for HQ 951,548.04 - - - 951,548.04

Hardware Purchase for Offices 19,568,000.00 - - 23,698,563.00 43,266,563.00

Total 46,496,707.22 4,401,322.02 1,003,620.00 30,898,563.00 82,800,212/-


5.1.3.2 Software Investments

Expenditure 2006-07 2007-08 2008-09 2009-10 Total

Oracle License and annual

technical support( ATS)

11,232,000.00

22,915,425.00 7,762,750.00 - 41,910,175

Software Development by M/s.

CMC Ltd. 2,800,000.00 9,800,000.00 2,080,000.00

1,400,000.00 16,080,000

Antivirus from Symantec 95,820.00

995,820.00

Total 15,027,820 32,715,425 9,842,750 1,400,000 58,985,995

5.1.3.3 Network Investments

Investments were made on network development and establishment. A total of 65 Lakh has been spent to

build a wide area network connecting all the administrative and geographical scope of Commercial Tax

Department. The intranet for KVATIS is accessible though WAN setup as part of this networking building

initiative.

Expenditure 2006-07 2007-08 2008-09 2009-10 2010-11

Total

Wide Area Network by M/s.

Frontier Business System

7,740,721.00 12,107,825 115,803 115,803 2,300,000 22,380,152

Lease Line by BSNL 95,645.00 6,978,143 ,615,265 22,663,598 8,900,000 43,352,651

Total 7,936,366 19,085,968 4,731,068 22,779,401 11,200,000 65,732,803

The graphs depicts the return on IT investment over the years. The decrease in return in the last year can

be attributed to major investments in hardware for future years.


The investments in hardware, software and networking activities has been considerably low (0.05%) with

respect to the amount of revenue collected by the department

A large extent of investments is expected in coming years for replenishing the old systems in place, new

set of servers for disaster recovery and additional computers for increasing the extent of IT and

computerization in the department.

5.1.4 Investment in awareness programs and communication plans

During the project initiation phase, considerable amount of Rs 900/-lakh was spent on improving and

inculcating awareness of KVATIS to all stakeholders. Awareness and this clear communication of benefits

to the stakeholders have enabled a smooth transition from manual process to KVATIS system.

The awareness was done through various modes like, newspaper advertisements, Advertisements in FM

radio and Televisions, Online advertisements in the Official site, Distribution of Pamphlets and other

Operational Manuals. One-on-One, Word of mouth was the one of the most effective approach wherein

the employees was the instruments of awareness.

Investment Particulars in awareness programmes Amount

Advertisement through electronic media 83,464,889.00

Advertisement through print media 6,576,468.00

Total 90,041,357.00

1250.611723.29

7428.32

2396.64

2006-07 2007-08 2008-09 2009-10

Returns on IT investment (in Rs)

0.09%0.08%

0.02%

0.06%

2006-07 2007-08 2008-09 2009-10

IT investment as a percentage of revenue collected


5.1.5 Communication Plans- Via Government Orders

For the successful integration and hassle-free deployment, timely Government orders were

communicated to ensure a smooth flow and integration of new modules in the KVATIS Project

Audit Reports and Statements – November 2010

Renewal of Registration and filing option for payment of tax at compounded rates – 30.04.2010

Downloading Statutory forms- 01.02.2010

e-Payment of taxes - Revised schedule issued for filing of returns – 10.09.09

e-payment of Tax

e-filing of VAT Returns

Table: Revised schedules for filing of returns

Sl.N Particulars Extended Time limits

1 Every dealer whose annual net tax payable for the preceding year was rupees ten lakh and above

On or before the fifteenth day of the month following the return period

2 Every dealer whose annual net tax payable for the preceding year was above Rupees two lakh but below Rupees ten lakh

On or before the twentieth day of the month following the return period

3 Every dealer whose annual net tax payable for the preceding year was above Rupees twenty five thousand but below Rupees two lakh

On or before the twenty-fifth day of the month following the return period

4 Others On or before the twenty-fifth day of the month following the return period

Most of the new changes and extensions have been made based on the inputs received from various

trade associations like the Institute of Chartered Accountants and Sales Tax Practitioners Association.


5.2 Organizational structure of CTD present/ prior to KVATIS

5.2.1 Organisational chart before computerization

5.2.2 Organisational Structure after KVATIS/Computerization

ITMC CELL

AC( ITMC)

System supervisor/ System

administrators


To manage the IT related queries and train all employees of the department, a special wing called ITMC-

Information management cell was established in year 2005.

Then existing Computer Wing functioning of the Commissionerate was designated as the Information

Technology Management Cell of the Department. The Assistant Commissioner (Training) was made

charge of the Information Technology Management Cell.

The Department constituted IT Management Cell consisting of technical members from within the

Department to monitor the progress of implementation of the project, its administration and Change

Management. IT Management Cell performs the key aspect of co-ordination of the various entities

involved in accordance with SLAs and ensuring the stakeholder participation. The IT Management Cell

functions in close association with the Department leadership. System Administrators are deployed in 14

districts to administer district level project implementation in close association with administrative heads. It

consists of system supervisors and system administrators. These people are well trained and well versed

with technology. In the initial phase of KVATIS, technical members were identified by department across

the various districts. These resources were trained and were given responsibility of each district. All IT

and KVATIS related issues were handled by these specialized resources. After the KVATIS initiatives

have stabilized, these resources were re-assigned from all districts and were centrally deployed in State

headquarters.

5.2.3 Roles and responsibilities of ITMC

Nodal agency in the Commercial Taxes Department to coordinate the IT-related activities of all

the vendors contracted by the Department

Monitor and guide all purchase orders issued by the Commercial Taxes Department for IT

hardware and software

Monitor the post-delivery performance of the vendors as per the purchase order, agreement/SLA

and take up with the vendor in any case of deficiencies in service delivery.

Render progress report on the services rendered by the various vendors from time to time


6 Impact Assessment Framework

6.1 Impact Assessment for tax payers and agents

Dimension Indicator

Economic Costs

Human effort required in filing of returns/ tax payment regarding commodity

classification, tax rates, tax computation, concessions, exemptions etc

Volume of Paper works required

Proficiency of Accounting required

Financial and compliance cost of filing returns

Time spent for filing of returns

Better Governance Access to statutory forms

Supervision and control over business accounts

Less instances of denial of service

Quality of services Promptness in updation of accounts

Department's responsiveness to queries/problems

Frequency of occurrence of errors in filing returns/ tax payment

User Friendliness of KVATIS

6.1.1 Quantitative analysis

To understand the qualitative aspects of effectiveness the following parameters were measured.

Dimension Indicator

Cost effectiveness Number of visits to CTD offices

Financial cost of filing returns

Time effectiveness Time spent for filing of returns

Practitioners - Cost effectiveness Increase in number of clients after KVATIS


6.2 Impact Assessment for employees of Commercial Tax Department

6.2.1 Quantitative Analysis

Dimension Indicator

Economic Increased revenue and tax collection

Number of discrepancies/offences detected per month

Additional Revenue through scrutiny/verification

Number of files scrutinized/verified per month

Better Governance Improvement in efficiency of work

Intra/inter departmental co-ordination/ exchange of information/data sharing

Office automation

Report generation/ MIS


Time spent for scrutiny/verification


Number of Visits of tax payers to CTD offices

Contribution to organizational goals Inclusion of new services by the commercial tax department

Grievance handling and responsiveness of tax payers to queries/defects

Employee Perspective Work morale and self esteem

Workload of Employees

Training availed for e-governance

6.2.2 Qualitative Analysis

Dimension Indicator

Work load Number of discrepancies/offences detected per month




6.3 Impact Assessment for Commercial Tax Department

Dimension Indicator

Effectiveness Tax collection over the last 5 years

Month wise revenue collection over last 3 years

Increase in tax base- number of returns filed

Number of live dealers ( Expected vs Actual)

Number of services availed in e-payment over last two years

Number of consignment declarations over last two years

Return per employee

Trend of payments- Offline/Online

Trend in interstate transaction details-Data capture

Return on investments

6.3.1

6.3.2 Other quantitative key statistics post automation

Dimension Indicators

Helpline effectives and support Number of Call per month in toll free numbers and other

telephonic help lines

Usage of emails

Website effectiveness Number of Page visits

Kind of information modules provided

Size of the website (In pages)


7 Impact Assessment of KVATIS

7.1 Dealers and Tax practitioners

7.1.1 Economic Cost Impact

Indicators

% of dealers

agreeing that

KVATIS have

improved the

service

delivery

% of STP’s

agreeing

that KVATIS

have

improved

the service

delivery

Statistical Z- test

Confidence levels

Is there a significant impact or

not?

95% 99%

Dealer

s STP’s

Deal

ers

STP’

s

Human effort required in filing of returns/ tax payment regarding commodity classification, tax rates, tax computation, concessions, exemptions etc

59% 42% Yes Yes Yes Yes

Volume of Paper works required (reduced) 73% 41%

Yes Yes Yes Yes


60% 51% Yes Yes Yes Yes

Financial and compliance cost of filing returns 47% 17%

Yes Yes Yes Yes

Time spent for filing of returns 70% 40% Yes Yes Yes Yes

The practitioners have rated human effort and financial cost and time spent to have increased with

KVATIS and this can be attributed to the increase in the clientele and the effort required in filing a

complete and accurate returns. Previously owing to the administrative and manual processes, department

hardly could check the compliance of all dealers within the limited time and lot of compliance issues

existed within the system.

Presently department has put restrictions on number of revisions in filing a return to ensure that not much

of bogus or window dressed details are inputted into the system. Now if the returns are not filed with

adequate information and accurate details, the KVATIS system automatically generates NOTICES.

Hence it requires more effort for a practitioner to adhere to the rules and coherence of information but the

same is in-line with increasing the tax compliance.


7.1.1.1 Qualitative response- Dealers Perspective

7.1.1.2 Qualitative responses- Practitioners Perspective

0.0

1.0

2.0

3.0

4.0

Human effort required in filing of returns


Frequency of occurrence of errors in filing

returns/ tax payment



Dealers Pespective

Before e-governance

After e-governance

0.0

1.0

2.0

3.0

4.0

Human effort required in filing

of returns


Frequency of occurrence of errors in filing returns/ tax

payment



Before e-governance

After e-governance


7.1.2 Better Governance and Service levels

Indicators

% of dealers agreeing that KVATIS have improved the

service delivery

% of STPs agreeing

that KVATIS

have improved

the service delivery

Statistical Z- test Confidence levels

Is there a significant impact or not?

95% 99%

Dealers STP Dealer

s STP

Access to statutory forms 80% 88% Yes Yes Yes Yes

Supervision and control over

business accounts 88% 93%

Yes Yes Yes Yes

Promptness in updation of

accounts 88% 93%

Yes Yes Yes Yes

Department's responsiveness to

queries/problems 81% 69%

Yes Yes Yes Yes

Frequency of occurrence of

errors in filing returns/ tax

payment 60% 51%

Yes Yes Yes Yes

The stakeholders have rated access to statutory forms, supervision and promptness of accounts to be

highly improved with the advent of KVATIS system. Previously in the manual process the errors while

filing was restricted to commodity entries and other major issues, currently with the advent of KVATIS, the

system generates notices for small issues like data formatting and other compliance hence increasing the

number of error occurrences. Eg. If required date format is dd-mm-yyyy, the system will generate notices

for any format different from the above specified format.


7.1.2.1 Qualitative responses – Dealers

7.1.2.2 Qualitative responses –Practitioners

7.1.3 Increase in number of clients for practitioners

More than 95% of the practitioners have reported that there have been a considerable number of

increases in number of clients after the advent of KVATIS system. This can be attributed to factors like

the level of computer literacy required in filing the services. Even though Akshaya Kendras were assigned

to help the taxpayers in availing the services, owing to the lack of technical competency and lack of

proficiency in the tax matter, there has been a lot of shift in taxpayers from Akshaya Kendras to tax

practitioners.

0.0

1.0

2.0

3.0

4.0

Access to statutory forms

Supervision and control over business

accounts

Promptness in updation of accounts


Dealers

Before e-governance

After e-governance

0.0

1.0

2.0

3.0

4.0


Supervision and control over business

accounts



Practitioners

Before e-governance

After e-governance


7.1.4 Effectiveness of KVATIS- Dealers and practitioners

The dimensions rated in descending order of effectiveness for dealers are as below.

Supervision and control over business accounts/ Inventory






Human effort required in filing of returns/ tax payment etc



The dimensions rated in descending order of effectiveness for practitioners are as below.

Supervision and control over accounts



Number of visits to CTD offices

Frequency of errors


Department's responsiveness to queries

This implies that supervision and promptness of updation of accounts has been the most effective aspect

of KVATIS for dealers and practitioners. As per dealers, there is not much substantial change or impact in

financial cost with the advent of KVATIS.

The magnitude of Z score at 99% confidence was used for analyzing the level of impact in dimensions.

5%

66%

20%8%

1%

Percentage growth in number of clients

Zero or negative growth

Upto 25% growth

upto 50% growth

upto 75% growth

100% or More growth


7.1.5 Factors responsible for adoption of KVATIS

The various factors responsible for easy adoption of KVATIS by dealers were analyzed.

The assessment framework was:

Dimension Indicators

Factors that facilitated your switch to e-services

Computer Literacy

Availability of proficient manpower


Departmental assistance

Cost efficiency

The various parameters were identified for enabling this easy transition. The parameters rated high are

computer literacy of the state and easiness of KVATIS system. Kerala is the most literate state in India,

with 94.59% literacy. The computer literacy for the state is also high with respect to other states. Most of

the dealers being interviewed where well versed with computer and other technology. Being

technologically savvy, taxpayers understand the importance of computerization and it‟s potential.

Computer Literacy

21%

Availability of proficient

manpower20%


21%


19%

Cost efficiency19%

Factors - Adoption of KVATIS


.

7.1.6 Impact of Awareness programmes carried out by department

Dealers have rated direct awareness programmes by the department via word of mouth; via training was

the most effective means of awareness. The direct interaction has enabled the department to impart the

benefits of KVATIS system, the cost effectiveness and ease of maintenance and other governance

1% 6%

35%

47%

11%

Computer Literacy

Very Low

Low

Average

High

Very High

5% 6%

38%41%

10%


Very Low

Low

Average

High

Very High

Very Low0%

Low6%

Average41%

High49%

Very High4%


2%

13%

49%

31%

5%


Very Low

Low

Average

High

Very High

3%

17%

51%

23%6%

Cost efficiency

Very Low

Low

Average

High

Very High


factors. There was frequent advertisement made in print media- both in regional newspapers and English

newspapers to ensure the reach of awareness.

Practitioners have found online help/tutorials and Departments assistance as the factors which have

given them the remote support to move to KVATIS system.

The below graphs depicts the cumulative responses from dealers and practitioners.

Audio-visual Media 16%

Print Media17%

Online Services

18%

Handouts/ Pamphlets

14%

Helpdesk/Helpline16%


19%

Awareness

Very Low15%

Low27%

Average36%

High17%

Very High5%

Audio-visual Media

Very Low9%

Low24%

Average41%

High21%

Very High5%

Print Media


7.2 Employees of commercial tax department

7.2.1 Better Governance

Indicators

% of employees agreeing that KVATIS have improved the

service delivery



90% 95% 99%

Number of discrepancies/offences detected per month 88%

Yes Yes Yes

Additional Revenue through scrutiny/verification 95%

Yes Yes Yes

Intra/inter departmental co-ordination/ exchange of information/data sharing 97%

Yes Yes Yes

Office automation

98%

Yes Yes Yes

Very Low5%

Low18%

Average45%

High27%

Very High5%

Online Services

Very Low18%

Low29%

Average43%

High8%

Very High2%

Handouts/Pamphelts

Very Low11%

Low24%

Average44%

High17%

Very High4%

Helpdesk/Helpline

Very Low7%

Low14%

Average41%

High29%

Very High9%




95%

Yes Yes Yes


71%

Yes Yes Yes


59%

Yes Yes Yes

Frequency of occurrence of errors in filing returns/ tax payment 76%

Yes Yes Yes

It was observed that all employees are not given access to all information‟s /details and are not well

versed with technicalities of report generation. It was reported that the navigation aspect and the

availability of relevant information to selected group of employees is demanding more time for scrutiny.

7.2.1.1 Qualitative scale of responses by employees

0

1

2

3

4

Number of discrepancies/offences

detected

Additional Revenue through

scrutiny/verification

Intra/inter departmental co-

ordination/ exchange of information

Office automation


Employees

Before e-governance

After e-governance


7.2.1.2 Qualitative scales of responses for parameters

7.2.2 Contribution to organizational goals

Indicators

% of employees agreeing that KVATIS have improved the

service delivery



90% 95% 99%

Intra/inter departmental co-ordination/ exchange of information/data sharing 97%

Yes Yes Yes

Grievance handling and responsiveness of tax payers to queries/defects 91%

Yes Yes Yes

Number of Visits of tax payers to CTD offices 80%

Yes Yes Yes

Additional Revenue through scrutiny/verification 95%

Yes Yes Yes

The inter-departmental coordination has increased as the KVATIS system enables easy information

management and reports from the system. The information from KVATIS is used by income tax

department, audit and verification team within department and other state commercial tax departments

also.

0

1

2

3

4




payment

Employee

Before e-governance

After e-governance


7.2.2.1 Qualitative scale of responses by employees

7.2.3 Employee productivity and morale

Indicators

% of employees agreeing

that KVATIS

have improved

the service delivery

Average of the qualitative responses Statistical Z- test

Confidence levels Is there a significant

impact or not?

Before e-

governance

After e-

governance 90% 95% 99%

Work morale and self esteem/Office automation

94% 2.8 3.7 Yes Yes Yes

Work Load of employees 51% 3.8 3.4 Yes Yes Yes

Interactions with employee during one-on one interviews and focus group discussion, it was reported that

the work load has increased tremendously with respect to the quality and kind of effective scrutiny. This is

because of the increased sample size of verification and increased tax base.

They also reported that the work load of non–productive functionalities like maintaining voluminous

registers and tedious job of reconciliation etc have reduced tremendously giving amble time for effective

verification and scrutiny of the files thus enhancing the tax compliance.

0

1

2

3

4

Intra/inter departmental co-ordination/ exchange of

information/data sharing

Grievance handling and responsiveness of tax payers

to queries/defects


Employees

Before e-governance

After e-governance


7.2.4 Effectiveness of each parameter KVATIS – Employees

The dimensions rated in descending order of effectiveness for employees are as below.

Responsiveness of tax payers to queries

Improvement in efficiency

Intra/inter departmental co-ordination


Additional Revenue by scrutiny/verification


Work morale and self esteem

Office automation

Volume of paper works

Time spent for scrutiny

This implies that improvement in efficiency, the level of inter-intra departmental coordination‟s has been

the most effective aspect of KVATIS for employees and there is not much substantial change or impact in

time spent for scrutiny with the advent of KVATIS.

The magnitude of Z score at 99% confidence was used for analyzing the level of impact in dimensions.

7.2.5 Training effectiveness

The training effectiveness is analyzed based on the following parameters- Adequacy of training Content,

Relevance of the content trained , frequency of trainings and follow on trainings.

Very Low3% Low

12%

Average49%

High30%

Very High6%

Adequacy of Content

Very Low2%

Low8%

Average41%

High39%

Very High10%

Relevance


In overall training effectiveness was rated average.

7.3 Overall rating of KVATIS

7.3.1.1 Dealers perspective

Very Low4%

Low18%

Average45%

High26%

Very High7%

Follow up

Very Low5%

Low17%

Average55%

High17%

Very High6%

Frequency

Adequacy of Content

25%

Relevance 27%

Follow up 24%

Frequency24%

Training effectiveness

1% 5%

31%

56%

7%

Overall rating of KVATIS- Dealers

Very Low

Low

Average

High

Very High

More than 60% of the total dealers sampled have

rated KVATIS application as highly effective. 30%

of the dealers have rated it as average owing to

the hardship of submitting the return hardcopy. All

factors like easiness, transparency, and better

governance and service levels are the

parameters which enabled KVATIS to be effective

and successful.


7.3.1.2 Practitioners perspective

7.3.1.3 Employees perspective

7.3.2

7.4 Commercial Tax Department

7.4.1 Increase in revenue collection

7%

13%

20%

27%

33%

Overall rating of KVATIS- Practitioners

Very Low

Low

Average

High

Very High

Very Low0%

Low2%

Average41%

High50%

Very High7%

Overall rating of KVATIS - Employees

0%

5%

10%

15%

20%

25%

2005-06 2006-07 2007-08 2008-09 2009-10

Pe

rce

nga

te g

row

th

Percentage growth in revenue collection

More than 60% of the total practitioners

sampled have rated KVATIS application as

highly effective. All factors like easiness,

transparency, and better governance and

service levels are the parameters which

enabled KVATIS to be effective and

successful.

More than 57% of the total employees

sampled have rated KVATIS application as

highly effective. All factors like easiness,

transparency, and better governance and

service levels are the parameters which

enabled KVATIS to be effective and

successful.


Year Collection (Rs. Crores) Absolute Increase in

collection (Rs. Crores)

2004-05 6701.05

2005-06 7037.97 336.92

2006-07 8563.31 1525.34

2007-08 9371.76 808.45

2008-09 11377.13 2005.37

2009-10 13200.19 1823.06

(Src. Budget in brief, Government of Kerala)

Compounded annual growth rate (CAGR) of revenue collection over the last 5 years is 17%. This growth

was despite the recession in the previous years.

7.4.2 Month wise revenue collection for the last 3 years

April May June July Aug Sept Oct Nov Dec Jan Feb Mar

2007-08 475 755.23 799.73 751.33 648.73 834.47 750.37 726.32 758.19 893.27 883.32 1409.4

2008-09 532.03 920.91 966.1 876.57 923.52 994.69 1033 955.05 911.43 973.8 973.65 1510.7

2009-10 588.6 1007.3 1039 994.46 1016.8 1178.1 1041.7 1057.5 1028.1 1201 1223.5 1824

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Re

ven

ue

co

llect

ion

(in

Rs.

cr)

Month wise revenue collection


7.4.3 Increase in tax base (number of returns filed)

Year Filed Returns Absolute Increase in

tax base

2005-06 323258

2006-07 453874 130616

2007-08 633425 310167

2008-09 918368 595110

2009-10 1584859 1261601

2010-11 (Projected) 1786405 1463147

Compounded annual growth rate (CAGR) of tax base over the last 5 years is 40.76%

The number of registered dealers in the state was as follows:

Financial Year Registered Dealers

2005-06 75238

2006-07 110982

2007-08 128512

2008-09 143477

2009-10 163840

2010-11 173642

The below graphs depicts the number of return which are actually filed with number of people who are

expected to file the returns. There has been substantial reduction in number of people who used to evade

tax or who followed manual procedures in the initial years. This has been achieved by the department

through initiatives like identifying the people those who are not filing tax via KVATIS module and

personally following and clarifying with the tax payers.

0.0%

50.0%

100.0%

150.0%

2006-07 2007-08 2008-09 2009-10 2010-11 (Projected)

Increase in tax base


7.4.4 Increase in the number of services availed

0

500000

1000000

1500000

2000000

2500000

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Increase in Tax base-dealers

Expected number of return filed

Actual number of files returned

0

100000

200000

300000

400000

500000

600000

700000

From Jan - Sept 2009

From Jan-Sept 2010

e-Payment of Tax

850000

900000

950000

1000000

1050000

1100000

From Jan - Sept 2009

From Jan-Sept 2010

e-Uploading of Invoices


7.4.5 Trend in online vs Offline payment - Based on the amount of transactions per year

The 1% of the offline payments in 2010 can be attributed to payments from the following areas:

Compounding fees

Payments against assessment

New registration charges, the new registration process is manual including all field visits/

investigations etc,

Security deposits etc

There has been considerable reduction in number of offline payments over the years.

Payment Modes 2008-09 2009-10 2010- April

till September

Cash 5806 1855 40

Challan 217447 86078 1322

Demand Draft 56252 25146 401

Cheque 484445 182488 2561

7.4.6 Trend in interstate

transactions

Financial Year

Interstate transactions

2006-07 68139

2007-08 587221

2008-09 980223

2009-10 972428

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

2008 2009 2010- April till September

Online Payment

Offline Payment

0

500000

1000000

1500000

2006-07 2007-08 2008-09 2009-10

Inter state transactions


Through KVATIS check post module, it has been possible to capture substantial details of interstate

transactions over the years. The compounded annual growth rate (CAGR) of interstate transaction over

the last 4 years is 143%. It was reported that there has been a consolidation in the travel vehicles and

hence there has been stagnation in number of transactions but the value of transactions has increased

over the years.

7.4.7 Fund utilized for Akshaya Kendra- Filing of Returns

(Src: C Section, Commercial Tax Department)

On a yearly basis an amount of 5.5crores has been kept aside for paying the Akshaya Kendras for the

service rendered by them to the taxpayers. Over the year 2009-10 the number of returns filed has

reduced by 27%. This can be attributed to the increase in departmental assistance and user friendliness

of KVATIS system and hence the increase in comfort ability of taxpayers in filing returns themselves

January to July2009 January to July 2010

Series1 3888483 3671276

3550000

3600000

3650000

3700000

3750000

3800000

3850000

3900000

3950000

In R

up

ee

s

Amount utilized- Returns filed through Akshaya Kendra

0

10000

20000

30000

40000

50000

60000

70000

80000

Jan-March 2009

Apr-June 2009

July-Sep 2009 Oct-Dec 2009 Jan-March 2010

Nu

mb

er

of

retu

rns

file

d

Returns filed through AkshayaKendra


The utilization rate for FY 2009-10 has been very low, only 10.3% of the total fund allotted for CSC‟s in

providing services to taxpayers has been utilized so far. Out of 5.5crores allotted only 56 lakh was the

total utilization. This implies that the there has been a drastic reduction in taxpayers availing the help of

third party agents for filing returns.

Return per employee

Particulars 2005-06 2009-10

Revenues (Rs. in Crore) 7037.97 13200.19

Total number of employees (Including all cadre) 4526 4613

Total number of employees (Excluding all indirect contributors) 3123 3165

Revenue collection per Employee(Including all cadre) 1.56 2.86

Revenue collection per Employee(Excluding all indirect contributors) 2.25 4.17

There has been an increase of more than 85% in

the revenue collected per employees with or

without the indirect contributors‟ of the departments

in the last 5 years. The department has planned for

a training program to make some of the indirect

contributors‟ like typist, almost 150 candidates to be

well versed with KVATIS so as to reduce the

workload of existing employees of the department.

7.4.8 Employee productivity

There is 21.3% increase in number of files scrutinized by the employees after the advent of KVATIS. This

is owing to the ease of computerization and availability of relevant information‟s in a click. There are no

reference made to the files of each of the dealers, all information are available in system and hence

scrutiny is made at ease.

Before the introduction

of e-governance

After the introduction of

e-governance (KVATIS)

Number of files scrutinized/verified

per month 49 63

The effectiveness of scrutiny has quadrupled over the four years from 20% to 80%. Previously the

scrutiny was based on sampling and after KVATIS every 3 months it has been mandated that all the

1.56

2.862.25

4.17

2005-06 2009-10

Revenue per employee

Including all cadre

Excluding all indirect contributors


cases meant for each employee is scrutinized. This is over and above the increase in tax base of more

than 40% over the last 5 years. Drudgery of work has also decreased with the advent of KVATIS.

7.4.9 User friendliness of KVATIS system

One of the other parameter studied in the survey was the user friendliness of KVATIS software

application. All the parameters namely the ease of navigation was one of the most effective parameter.

This implies that relevant information are available without much hassle of to-and- fro movements within

the system. The other parameters were also rated high namely the look and feel, availability of relevant

information‟s and online help and tutorials.

The graph below depicts the overall result from all stakeholders collectively namely dealers, tax

practitioners and employees.

The ease of navigation and look are feel has been rated average to high. The help provided online and

offline has been considered as a major attribute in the KVATIS system and has been rated above

average by all the three set of stakeholders.

.

3% 10%

44%

34%

9%

Ease of Navigation

Very Low

Low

Average

High

Very High

2% 7%

48%33%

10%

Look and feel

Very Low

Low

Average

High

Very High

10%

22%

42%

23%

3%

Help-online/offline

Very Low Low Average High Very High

6%

15%

43%

29%

7%

Availability of relevant information

Very Low Low Average High Very High


7.5 Other key statistics

7.5.1 VAT Helpline - effectives and support

VAT- HELPLINE started as Instant redressal of queries raised by the dealers & tax practitioners was quite

inevitable for the smooth administration of VAT. Telephonic redressal played an important role in this

regard. Citizens can lodge their doubts/complaints through telephone, which would be recorded along

with generation of token numbers. The system was designed to ascertain the status of their complaints

using the token number generated. A dedicated computerized citizen call center is in place for supporting

the dealers to raise their grievances and technical queries, to disburse the right information at the right

time to the needy and also to ensure transparency. The role of citizen call center is limited to general

queries and for more detailed clarifications the department provided 24*7*365 toll free helpline service to

dealers. The VAT Helpline assists the dealers through e-mail as well as over phone to clear the doubts

relating to VAT Act and Rules. The IT Management Cell (ITMC) provides technical assistance on issues

relating to e-Filing & e-Payment through e-mail as well as over telephone. The e-SMS facility, which is an

exclusive SMS Gateway, enables the Department to communicate messages instantly to trade groups

and officials.

The trend in helpline and email queries was in-line with the various developments within the KVATIS

system. The numbers of calls were close to 200+ in the initial months and as system matured the number

of calls stabilized to an average of 30 calls daily. With the introduction of e-payment the number of

redressal requests again increased and the queries were mainly related to opening of bank accounts and

other general grievance issues of department‟s responsiveness and process and procedures etc. There

was a toll free number (BSNL) and a general number 9446505527 for all telephonic help lines.

The two emails used for helpline was [email protected] and [email protected] and was

operational from January 2006 onwards. Initially the helpline dealt with all queries related to VAT and was

later adopted for KVATIS application. The number of emails ranged from 30-40 emails daily in the peak

times.

The Tax Information Exchange System (TINXSYS) implemented under the guidance of the empowered

Committee of State Finance Ministers provides a unique platform for the exchange of information across

the various Commercial Tax administrations. The dealer information details available in KVATIS are

regularly updated to TINXSYS database through a scheduled process, configured in the KVATIS server.

Seamless information exchange between States was a crucial aspect which required urgent attention and

has emerged as the key mechanism to prevent frauds related to inter-state trade.

7.5.2 Website details

The website has 962 pages including PDF files. There are totally 25 static pages and 6 pages out of it is

for public information‟s and messages and 19 static pages are intended for wed administration and

mailto:[email protected]

mailto:[email protected]


related works. There are totally 96 dynamic pages and 27 of them are for public and 69 dynamic pages

intended for Web site administration.

The below table depicts the categories of information‟s and the specific information available in the

website.

Broad category Specific information type Provided in the

website

General information

(1) Tax forms Yes

(2) Tax brochures/ guides Yes

(3) Tax law Yes

(4) Tax rulings yes

(5) Tax calculators Tax Rates provided

Specific focused tax (6) Media materials information yes

(7) Industry focused tax advice yes

Taxpayers‟ transactions (8) Tax returns yes

(9) Tax payments yes

Individual taxpayer /account/ record information (10) Accounting information yes

(11) Registration changes yes

Legal (12) Court decisions on tax matters yes

(13) Tax law yes

Legislation (15) References to recently approved or yes

pending legislation Tax Administration (16) Operational performance data no

(17) Speeches of senior officials. No

The transactions portion of the website is separated from the information portions by different security

levels. Client side encryption is utilized in the domain. The content management module is used for all

updations.

KVATIS web application is subject to the audit by STQC (Standardization, Testing & Quality Certification)

- a Government of India agency and monetary transactions are secured using VeriSign SSL (Secured

Socket Layer) Certification.


8 Challenges faced and measures taken

8.1.1 Non-availability of digitized dealer data

The success of a software application depends on the data and metadata inputted into the system. Non

availability of digitized date was a major hurdle in optimum utilization of KVATIS.

The department has strategized to start the data collection in specific formats so as to digitize the same

offline by the department. The department engaged team of System Administrators to develop and

implement tools for digitization of dealer details. The tools developed for registration applications could

electronically convert and created database of the relevant information‟s. There was backlog of more than

2 years in the initial phase of the project. The department has later mandated all dealers to file the

backlog returns.

8.1.2 Data Accuracy

The data entry was manual and hence typing mistakes and errors was a major issue in the database.

The digitized data was later provided to the dealers on-line and was asked to revert on any discrepancies.

The suitable corrections were made in the system based on the reports from dealers.

8.1.3 Resistance from stakeholders - employees

The majority of the department officials were less familiar to computer system and was reluctant to

change the procedures followed for years. Even after repeated instruction from top level officials there

had been various instances of hindrance and the same affected the progress of the project.

The department has come up with a new strategy to encourage the officials who supported the initiative

and penalize the officials who hindered the normal working. A 20:20 analysis was performed, whereby

the best performing and poor performing 20 officers are identified on a monthly basis. The poor

performing officers were imposed notices and memos while the best performing officers were given

recognition and appreciation.

8.1.4 Digital divide among trader community

The small trader community resisted the KVATIS initiate as majority didn‟t have computerized system for

their business. The department has provided free electronic filing facilities through Akshaya citizen

service centers to each of the traders.

8.1.5 Digital Divide among officers

Being new to computer systems, majority of the officials couldn‟t handle any technical issues and sorting

out technical issues was a problem. The department identified ITMC cell and had deputed a system

administrator in each district to help the officials in any technical issues.

The department has made continuous effort in providing relevant trainings to the officials.


8.1.6 Huge number of trading commodities

As per the requirement, the number of commodities exceeded 8000 numbers and dealers found it very

difficult and cumbersome to choose the appropriate commodity from this huge list.

The department has made measures to group the huge list of commodities to 309 commodities to ensure

proper filing was done by the taxpayers. This simplified the efforts required by the tax payers and

employees.

8.1.7 Implementation of e-Payment

The Trade organizations raised objection to open separate account in specific banks such as

State Bank of India („SBI‟) or State Bank of Travancore („SBT‟). The issue was solved by

providing the facility to dealers to open zero balance account to facilitate e-payment.

Dealers requested to extend the facility to other nationalized and Kerala origin banks. The

government has accorded sanction to extend the e-payment service to 11 other banks also, and

the same is under consideration of the Reserve Bank of India.

8.1.8 Multiple returns for the same period

A dealer had to submit separate returns under different Acts like KGST, VAT and CST Acts. The

department has mandated to integrate all returns to a single return


9 Areas of Improvement for KVATIS

9.1.1 Technical Issues

The system has to be re-defined with few technical changes in the application like enabling a means to

file quarterly returns for contractors as currently they are filing “NIL” dummy return for all months other

than quarterly returns.

9.1.1.1 Remedy taken by department

The department has a technical committee assigned for studying the technical issues and they are

making incremental changes in the KVATIS system on a regular basis.

9.1.2 Refund Mechanism

Currently the refund mechanism is not made online and hence is time consuming and delayed.


The department has a module called Refund in the KVATIS system. As per the phased manner of

implementation the refund module is expected to be operationalised in the next 6-7 months.

9.1.3 Hardcopy submission

Currently all tax payers are requested to submit the hardcopy of returns filed on a monthly basis to the

department. This is mandated by the department to ensure a backup of data in the system as there are

no long term solutions made for disaster recovery. It was also reported by the sampled population that

financial cost of return filing has increased owing to the printouts and internet connectivity charges.


Disaster Recovery: The department has a project in pipeline to make an optimum solution for disaster

recovery. Presently the data is back up in a remote location in Mumbai on a daily basis.

Digital Signature: The department has also envisaged bringing in digital signature to all the stakeholders

which in turn can help in eliminating the mandate of hardcopy submission.


10 References

Impact Assessment of e-Governance Projects by Department of Information Technology

Good practices in e-governance and Compendium on 12th National e-governance conference

Strategies for Improving the Take-up Rates of Electronic Services.pdf, Prepared by Forum on Tax

Administration Taxpayer Services Sub-group March 2006

SURVEY OF TRENDS IN TAXPAYER SERVICE DELIVERY USING NEW TECHNOLOGIES,

Prepared by Forum on Tax Administration Taxpayer Services Sub-group, OECD, Organisation for

Economic Co-operation and Development

Measurement of Taxpayer Services, Management of the VAT: Improving the Level of Compliance

using Performance Indicators Lessons for the Pacific Islands Countries, prepared by Director,

French Tax administration


11 Annexure

1. Details of engagement meeting held

Meetings with Head Office and Regional Officers of Department of Commercial Tax,

State head quarters Trivandrum

Circle office, Vanchiyoor

Office at peroorkada, Thiruvananthapuram

Office at Neyyatinkara, Nedumangadu

Circle office, Mattancherry

Circle office, Kannur

Circle office, Kozhikode

Circle office, Thrissur

Circle office, Ernakulam

Circle office, Kollam

Meetings with officials of Department of Commercial Tax at Check Post, Amaravila

Meetings with CMC vendors, Thiruvananthapuram

Meetings with faculty of GIFT, Kaimanam, Thiruvananthapuram

Akshaya Kendra – CSC Operators about e-filing and consignment declarations, Amaravila

Tax payers (traders/Dealers) – Trivandrum, Nedumangadu, Neyyatinkara, Mattancherry, Kannur,

Kozhikode, Thrissur, Ernakulam, Kollam

Tax advisors from Trivandrum, Nedumangadu, Neyyatinkara, Mattancherry, Kannur, Kozhikode,

Thrissur, Ernakulam, Kollam

Institute of Chartered Accountants of India, Trichur

Kamath and Kamath Associates , Trichur

General Secretary - All Kerala income tax & sales tax practitioners association,

Thiruvananthapuram

One-on one meeting with tax payers- through Random Sampling, Ernakulam

Lorry drivers at Check post, Amaravila

Greencard holders, Thalaserri

Kerala Vyapari Vyavasayi Ekopana Samithi, State President, Calicut

Kerala Chamber of Commerce and Industry, former president, Trivandrum

The Malabar Chamber of Commerce, Chamber House, Former President, Calicut

The Malabar Chamber of Commerce, Chamber House, Current President,

Indian Rubber Dealers Federation, President, Kottayam

All Kerala Tiles and Sanitary Dealers Association, President, cochin

All Kerala Distributors Association, president, Ernakulam

Trade Union (Kerala GO), State General secretary

Trade union (NGO Union) ,representative


Institute of Chartered Accountants of India, Trichur

Indian Rubber Dealers Federation, President, Kottayam

2. Questionnaire for Dealers/Tax payers

Questionnaire- Dealers

Name of the respondent: (optional)

Name of the Business Entity:-

District

Rural/Urban

Commodity.

1. Gold/Jewellery

Sector

Manufacturer

2. White goods/ Electrical/ Electronic Wholesaler

3. Readymade garments Retailer,

4. Rubber and rubber products Distributor/stockist

5. Iron and Steel/Hardware /Paint

Tick the appropriate channel of e-service

Self

6. Cement CA/ Advocates/Tax Practitioner

7. Provisions Through Akshaya Kendra

8. Motor Vehicles

Annual total turnover of the business

(2009-2010)

<10 Lakhs

9. Petrol/ liquor >10<50 Lakhs

10. Timber/Plywood/Glass/Hill Produce >50 Lakhs

Sl.N Questions Tick the appropriate scale

1

Access to statutory forms V.Low Low Average

High V. High

Before e-service

After e-service

2

Promptness in updation of accounts V.Low Low Average

High V. High

Before e-service

After e-service

3 Supervision and control over business accounts/ Inventory

V.Low Low Average

High V. High


Before e-service

After e-service

4


V.Low Low Average

High V. High

Before e-service

After e-service

5


V.Low Low Average

High V. High

Before e-service

After e-service

6

Volume of Paper works required V.Low Low Average

High V. High

Before e-service

After e-service

7

Financial cost of filing returns V.Low Low Average

High V. High

Before e-service

After e-service

8

Time spent for filing of returns V.Low Low Average

High V. High

Before e-service

After e-service

9


V.Low Low Average

High V. High

Before e-service

After e-service

10

User Friendliness of KVATIS V.Low Low Average

High V. High

Ease of Navigation

Look and feel

Help (online/offline)


Availability of relevant Information

11

Awareness / Familiarization programs, online services/ tutorials availed for e-filing

V.Low Low Average

High V. High

Audio-visual Media

Print Media

Online Services

Handouts/ Pamphlets

Helpdesk/Helpline


12

Factors that facilitated your switch to e-services

V.Low Low Average

High V. High

Computer Literacy




Cost efficiency

13

Number of visits to CTD offices

(On an Annual Basis) In figure

Before e-service

After e-service

14 Overall rating of e-service of KVATIS

V.Low Low Average High V. High

15 Suggestions and Comments


3. Questionnaire for practitioners

Questionnaire: Practitioners

Name of the respondent: (optional)

District

Question No.

Question Tick the appropriate scale

1

Access to statutory forms V.Low Low Average High V. High

Before e-service

After e-service

2

Promptness in updation of accounts V.Low Low Average High V. High

Before e-service

After e-service

3



Before e-service

After e-service

4

Department's responsiveness to queries/ problems


Before e-service

After e-service

5



Before e-service

After e-service

6 Volume of Paper works required V.Low Low Average High V. High

Before e-service

After e-service

7 Financial cost of filing returns V.Low Low Average High V. High

Before e-service


After e-service

8 Time spent for filing of returns V.Low Low Average High V. High

Before e-service

After e-service

9



Before e-service

After e-service

10

User Friendliness of KVATIS V. Low Low Average High V. High

Ease of Navigation

Look and feel



11

Awareness / Familiarization programs, online services/ tutorials availed for e-filing

V. Low Low Average High V. High

Audio-visual Media

Print Media

Online Services

Handouts/ Pamphlets

Helpdesk/Helpline


12

Percentage increase/decrease in number of clients after e-service

0 or Negative

Upto 25%

Upto

50%

Upto

75%

100% or

above

13

Number of visits to CTD offices (On an Annual Basis)

In figure

Before e-service

After e-service


14

Overall rating of KVATIS System V. Low Low Average High V. High


11.1.1


4. Questionnaire for employees

Questionnaire-Employees

Name of the respondent:(optional) Division

(Tick the appropriate)

Assessment Wing

District

Intelligence Wing

Check Post

Question No.

Question Tick the appropriate scale

1



Before e-governance

After e-governance

2

Improvement in efficiency of work V. Low Low Average High V. High

Before e-governance

After e-governance

3



Before e-governance

After e-governance

4

Work morale and self esteem V. Low Low Average High V. High

Before e-governance

After e-governance

5



Before e-governance

After e-governance

6

Office automation V. Low Low Average High V. High

Before e-governance

After e-governance


7

Report generation/ MIS V. Low Low Average High V. High

Before e-governance

After e-governance

8

Responsiveness of tax payers to queries/defects


Before e-governance

After e-governance

9

Volume of Paper works required V. Low Low Average High V. High

Before e-governance

After e-governance

10

Time spent for scrutiny/verification V. Low Low Average High V. High

Before e-governance

After e-governance

11



Before e-governance

After e-governance

12

Workload of Employees V. Low Low Average High V. High

Before e-governance

After e-governance

13

Number of Visits of tax payers to CTD offices V. Low Low Average High V. High

Before e-governance

After e-governance

14

Training availed for e-governance V. Low Low Average High V. High

Adequacy of Content

Relevance

Follow up

Frequency


15

User Friendliness of KVATIS V. Low Low Average High V. High

Ease of Navigation

Look and feel



16

Number of files scrutinized/verified per month In figure

Before e-governance

After e-governance

17

Overall rating of KVATIS System




5. Z-test Analysis of Dealers

95% 99%


z-Test: Two Sample for Means z-Test: Two Sample for Means

Variable 1 Variable 2 Variable 1 Variable 2

Mean 2.700787 3.571429 Mean 2.700787 3.571429

Known Variance 1.3 1.2 Known Variance 1.3 1.2

Observations 127 126 Observations 127 126

Hypothesized Mean Difference 0


z -6.19363

z -6.19363

P(Z<=z) one-tail 2.94E-10


z Critical one-tail 1.959964


P(Z<=z) two-tail 5.88E-10


z Critical two-tail 2.241403 z Critical two-tail 2.807034


95% 99%



Mean 2.726563 3.920635 Mean 2.726563 3.920635





z -9.51864

z -9.51864

P(Z<=z) one-tail 0

P(Z<=z) one-tail 0



P(Z<=z) two-tail 0

P(Z<=z) two-tail 0 z Critical two-tail 2.241403 z Critical two-tail 2.807034


Supervision and control over business accounts/

Inventory

95% 99%



Mean 2.76378 3.905512 Mean 2.76378 3.905512

Known Variance 1 0.8 Known Variance 1 0.8




z -9.59025

z -9.59025

P(Z<=z) one-tail 0

P(Z<=z) one-tail 0



P(Z<=z) two-tail 0



95% 99%



Mean 2.8125 3.428571 Mean 2.8125 3.428571





z -4.9072

z -4.9072






P(Z<=z) two-tail 9.24E-07 z Critical two-tail 2.241403 z Critical two-tail 2.807034

Human effort required in filing of returns/ tax

95% 99%



payment etc


Mean 3.390625 2.724409 Mean 3.390625 2.724409





z 4.663896

z 4.663896








95% 99%



Mean 3.574803 2.417323 Mean 3.574803 2.417323

Known Variance 1 1 Known Variance 1 1




z 9.2236

z 9.2236

P(Z<=z) one-tail 0

P(Z<=z) one-tail 0



P(Z<=z) two-tail 0



95% 99%




Mean 3.054688 2.84127 Mean 3.054688 2.84127





z 1.620305

z 1.620305

P(Z<=z) one-tail 0.052583

P(Z<=z) one-tail 0.052583



P(Z<=z) two-tail 0.105167

P(Z<=z) two-tail 0.105167 z Critical two-tail 2.241403 z Critical two-tail 2.807034


95% 99%



Mean 3.460938 2.425197 Mean 3.460938 2.425197

Known Variance 1 1 Known Variance 1 1




z 8.269662

z 8.269662








payment

95% 99%



Mean 3.054688 2.503937 Mean 3.054688 2.503937






z 4.395633

z 4.395633







6. Z-test analysis of Practitioners

Z(95%) Z(99%)

1.96 2.58

Respondents

District

Z Value Reject the null hypotheses ("There is no impact because of e-

Service")?


Before e-service -11.61733532 After e-service

Yes Yes



Yes Yes



Yes Yes

Department's responsiveness to queries/ problems


Yes Yes




Yes Yes


Before e-service 0.560903071 After e-service

Yes Yes



Yes Yes



Yes Yes


Before e-service 1.505685713 After e-service

Yes Yes

Z-test analysis of Employees

Question 90% 95% 99%

Number of discrepancies

/offences detected per

month

z-Test: Two Sample for Means



Variable 1 Variable 2 Variable 1 Variable 2 Variable 1 Variable 2

Mean 2.45 3.532995 Mean 2.44898 3.532995 Mean 2.44898 3.532995

Known Variance 0.55 0.66 Known Variance 0.55 0.66 Known Variance 0.55 0.66


Observations 196.00 197 Observations 196 197 Observations 196 197

Hypothesized Mean Difference 0.00



z -13.82 z -13.8157 z -13.8157

P(Z<=z) one-tail 0.00 P(Z<=z) one-tail 0 P(Z<=z) one-tail 0

z Critical one-tail 1.64 z Critical one-tail 1.959964 z Critical one-tail 2.575829

P(Z<=z) two-tail 0.00 P(Z<=z) two-tail 0 P(Z<=z) two-tail 0

z Critical two-tail 1.96 z Critical two-tail 2.241403 z Critical two-tail 2.807034

Improvement in efficiency

of work





Mean 2.81 3.868687 Mean 2.811224 3.868687 Variable 1 Variable 2

Known Variance 0.47 0.38 Known Variance 0.47 0.38 Mean 2.811224 3.868687

Observations 196.00 198 Observations 196 198 Known Variance 0.47 0.38


Hypothesized Mean Difference 0 Observations 196 198

z -16.09 z -16.09409


P(Z<=z) one-tail 0.00 P(Z<=z) one-tail 0 z -16.09409


z Critical one-tail 1.64 z Critical one-tail 1.959964 P(Z<=z) one-tail 0

P(Z<=z) two-tail 0.00 P(Z<=z) two-tail 0 z Critical one-tail 2.575829

z Critical two-tail 1.96 z Critical two-tail 2.241403 P(Z<=z) two-tail 0

z Critical two-tail 2.807034






Mean 2.21 3.718593 Mean 2.212121 3.718593 Mean 2.212121 3.718593






z -18.13 z -18.13258 z -18.13258





Work morale and self esteem






Mean 2.83 3.747475 Mean 2.831633 3.747475 Mean 2.831633 3.747475






z -11.99 z -11.98695 z -11.98695





Additional Revenue through






Mean 2.67 3.785714 Mean 2.668367 3.785714 Mean 2.668367 3.785714






z -15.49 z -15.48874 z -15.48874






Office automation





Mean 2.33 3.605 Mean 2.329949 3.605 Mean 2.329949 3.605






z -15.70 z -15.69539 z -15.69539






Report generation/

MIS





Mean 2.22 3.919598 Mean 2.22 3.92 Mean 2.22 3.92


Observations 197.00 199 Observations 197.00 199.00 Observations 197.00 199.00




z -19.81 z -19.81 z -19.81

P(Z<=z) one-tail 0.00 P(Z<=z) one-tail 0.00 P(Z<=z) one-tail 0.00


P(Z<=z) two-tail 0.00 P(Z<=z) two-tail 0.00 P(Z<=z) two-tail 0.00


Responsiveness of tax payers to queries/defects





Mean 2.64 3.707071 Mean 2.635897 3.707071 Mean 2.635897 3.707071


Observations 195.00 198 Observations 195 198 Observations 195.00 198.00





z -12.92 z -12.92404 z -12.92

P(Z<=z) one-tail 0.00 P(Z<=z) one-tail 0 P(Z<=z) one-tail 0.00


P(Z<=z) two-tail 0.00 P(Z<=z) two-tail 0 P(Z<=z) two-tail 0.00


Volume of Paper works

required





Mean 3.7 2.7 Mean 3.75 2.68 Mean 3.747475 2.683417


Observations 198.0 199.0 Observations 198.00 199.00 Observations 198 199




z 11.5 z 11.50 z 11.50






Time spent for






Mean 3.51 2.852792 Mean 3.51 2.85 Mean 3.51 2.85






z 6.26 z 6.26 z 6.26






payment





Mean 3.54 2.299492 Mean 3.540816 2.299492 Mean 3.540816 2.299492







z 14.60 z 14.60072 z 14.60072





Workload of Employees





Mean 3.89 3.474747 Mean 3.89 3.47 Mean 3.89 3.47






z 4.33 z 4.33 z 4.33






Number of Visits of tax payers to

CTD offices





Mean 3.75 2.37 Mean 3.75 2.37 Mean 3.75 2.37






z 15.99 z 15.99 z 15.99





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