The government may have no option but to abandon its soft approach to a section of taxpayers who are presumably evading payment of their due share of goods and services tax. A view has emerged at a high-level meeting of tax officials on Saturday to tighten the monitoring of taxpayers who have shown a big divergence in their admitted tax liability in the pre- and post-GST periods. Scientific methods will be employed to verify the tax liability of industries and firms, where cases of large-scale evasion are suspected. The meeting of revenue officials from states and the Centre was convened in the backdrop of the the October GST revenue being 10% lower than the average in the preceding three months, at Rs 83,000 crore. It is also feared that the mop-up would likely decline further as, starting November, the effect of rate reductions of over 200 items might have come into play. The continued utilisation of accumulated integrated GST (IGST) credits by taxpayers instead of cash for tax payment and refunds to exporters could also hit the net revenue. The meeting was chaired by finance secretary Hasmukh Adhia.
A government official said the government was trying to analyse tax payment patterns with return filing data accumulated since July, and compare it with the corresponding period of the previous year. “Without invoice matching, it would be difficult for both the taxpayers and the government to assess the actual input credit and liability, which effectively means that taxpayers could take advantage of the situation and the government might be forced to abandon its soft approach towards enforcement,” the official added.
At the time of launch in July, assessees were required to file triplicate comprehensive returns (GSTR-1, 2 and 3), which need information of sales and purchase of a taxpayer. However, there was widespread discontent with technical glitches faced by taxpayers when it came to filing these returns. This eventually prompted the government to defer triplicate forms till March next year and instead allowed assessees to file a summary return form GSTR-3B. Although this has made life easier for taxpayers, as this form requires self-assessed tax liability and input tax credit, it has created a blindspot for the government, which is not sure about the validity of data. For instance, the transitional credit claims on pre-GST stock stood at `65,000 crore, which prompted the tax department to launch a probe as it reckoned that the amount was on the higher side.
As FE reported earlier this week, in order to collect authentic and comparative data, the Central Board of Excise and Customs (CBEC) had asked its field formations to collect granular data of taxes paid and credit availed by assessees under the goods and services tax (GST) for the July-October period and compare it with the corresponding period of last fiscal. This, the board hoped, would bring out any anomalies in tax payment and utilisation of input tax credits (ITC) by taxpayers.
The analysis was to be based on central GST, state GST, integrated GST and compensation cess paid by assessees against pre-GST revenue of the corresponding period. In cases where it is possible, the officials would also take VAT and CST revenue into account.
Although Saturday’s meeting was held to discuss and analyse the revenue pattern based on data collection, tax officials found it difficult to convince assessees to part with detailed information on their business due to various reasons, including the comprehensive nature of the request. “We would have liked to base our analysis on more data, but due to paucity of time it wasn’t possible,” the official said.
Apart from the limited time availability, the tax officials also ran into uncooperative assessees, which prompted the department to shoot another letter on December 5 to officials, urging them to be more ‘resourceful’ in their efforts. The CBEC missive, as reported by FE, also asked the officials to report the details of chartered accountants and asseessees who had shown unwillingness to share information. This prompted many experts to point out that such tone and tenor bore resemblance to instances of tax terrorism, especially since it wasn’t limited to junior officials but came from a member of CBEC himself.