Evaders booked for misuse of input tax credit, mis-declaration and non-filing of GST returns in last one year
Tax sleuths have detected Goods and Services Tax (GST) evasion of over Rs 4,400 crore during last one year after the new tax regime was implemented in the country.
Investigators have booked the evaders for misuse of input tax credit (ITC), mis-declaration and non-filing of GST returns.
"In many cases, traders are filing bogus invoices to claim ITC. There are many instances where invoices are issued on behalf of the companies that existed on papers for the purpose of availing GST refunds," sources in the finance ministry's Central Board of Indirect Taxes and Customs (CBIC) said.
The Director General of Goods and Services Tax Intelligence (DGGI) has detected 604 cases of tax evasion amounting to Rs 4,441 crore during July 2017 and September, 2018. About 57% of the taxes evaded have been recovered. The data available with the ministry shows a recovery of Rs 2,547 crore of GST during the past one year. The number of recovery cases filed during this period was 450. The filing of cases started three months after the GST was implemented on July 1, 2017, to make the process of GST implementation smooth.
Though the tax recovery rate is much better than the pre-GST regime, as much as Rs 1,900 crore of tax revenues have been taken away on account of evasion so far.
Experts feel that tax collections will eventually go up once the government introduces invoice matching on real-time basis. However, in absence of online matching of invoices, tax evasion could be much more than ha been unearthed by the tax sleuths, they said.
"The original idea was 100% invoice matching. Once we are able to achieve it, evasion would be minimal," said D K Srivastava, chief policy advisor at EY.
While internationally also, the modus operandi for tax evasion under the GST involves the use of fake bills and claims are made on that account, tax evasion remains minimum at only half a percent in most European countries, Srivastava said.
A key feature of the GST regime, the matching of invoices, has been put on hold by the GST Council. Currently, the companies are filing input credit on the basis of self-declaration.
Experts feel that the lack of enough measures to check tax evasion have contributed to the revenue shortfall. The GST collections have not kept pace with a monthly target of Rs 1 lakh crore. During 2017-18, the government collected Rs 7.41 lakh crore.
About 1% (1 lakh) of the registered taxpayers are paying 80% of the tax. Concerned about the shortfall in revenues, the central government has introduced a number of measures, including data analytics, to plug tax leakages.
Apart from this, other anti-evasion measures such as e-way bill and tax collection at source have also been implemented.
"The government should do regular audits of the firms to find out who is not filing. Any tax evasion is bound to get unearthed in the new GST regime. The compliance and the structure in place allows taxmen to find evaders easily," Prashanth Agarwal, corporate tax consultant at PwC, said. "Considering that over one crore firms are registered under GST system, tax evasion of Rs 4,400 crore is not huge," he said.
TAXING TIMES
Rs 2,547 cr – recovery of evaded GST during the past one year
57% – of the evaded taxes have been recovered
Rs 1,900 cr – tax revenues taken away on account of evasion so far
450 – number of recovery cases filed during the last year
1% or 1 lakh – of the registered taxpayers are paying 80% of the tax
Rs 1L cr – monthly GST collection target
PLUGGING THE GAP
- Experts feel that lack of enough measures to check tax evasion have contributed to the revenue shortfall
- The central government has introduced a number of measures, including data analytics, to plug tax leakages
- Other anti-evasion measures such as e-way bill and tax collection at source have also been implemented
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 "GST evasion")
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