The government is setting up a mechanism wherein data obtained through GST reporting could be correlated with the income-tax filings.
While the project is still in the initial stage, the government wants to create a database whereby income of companies and their promoters could be matched with that of the tax returns filed, said a person in the know.
It is still unclear whether the government would use this data to dig out tax evasions in the earlier years or whether this will only be for prospective tax scrutiny.
Unlike the earlier tax regime, GST leaves a trail, especially for the business of size, and it becomes hard to underreport income or exaggerate expenses.
Industry trackers said tax officers don't have to go through the sea of data to make sense as big data analytics could do the same for them and throw results or raise red flags.
"Technically, it is possible to use GST data to draw linkage with the income-tax data through the common data set with the help of analytics. Currently, the GSTN and tax department already have the data to carry out the risk analysis where outliers in terms of the industry average of tax payments is scrutinised and those not paying or under-reporting company revenues could be questioned," said Jaskiran Bhatia, partner, tax technology and analytics, Deloitte India.
Take the example of a unit manufacturing a specialised chemical used in the pharmaceutical industry. The promoters of the company have a turnover of about Rs 30 crore annually for the past few years, but they were paying corporate tax only on about Rs 4 crore. Not just that, the promoters have been underreporting their own income and escaping income-tax.
"Such manoeuvrings are now tough," said a tax adviser for the promoter family. "Earlier, there was no record of raw materials purchased and goods supplied; now, that cannot be manipulated, resulting in a sudden surge in the company's revenues. Also, there are other tricks promoters used to show that their income is much below the highest I-T band," the adviser told ET.
"It is imperative that the GST return is tied with the financials submitted to the income-tax office. Any discrepancy would be questioned by the income-tax office and the taxpayers would be required to explain the deviations," said Amit Maheshwari, partner, Ashok Maheshwary & Associates.
Tax experts say a sudden spurt in revenues in a company's turnover mainly due to GST could raise red flags. "If the GST return shows a big jump in turnover of the taxpayer (due to increasing formalisation of the economy, which is definitely a possibility in several cases) compared to the previous years, this could lead to tax officers questioning the past year's returns as well," said Maheshwari.
To bring more companies under the corporate tax net and zero in on areas where registered companies pay less tax through underreporting, the government has, since 2016, already been running tax analytics on the sea of data collected.
ET had first reported on August 3 that the government was conducting data analytics on income-tax records of taxpayers and is set to go after benami properties.
The tax department has commenced raids across the country, starting with the biggest income-tax evaders, on those creating and owning benami properties.
The tax department is already analysing a maze of data including phone records, credit cards and PAN details, tax returns and even social media platforms of the tax payers.
It is virtually impossible to go through various structured and unstructured data sources and make sense of it, but for the big data analysis tools used by the tax department.
The department also involves some outside technology experts to analyse the data or provide the necessary tools.