Not filing goods and services tax (GST) returns on time could cost businesses their assets, as well as their tax registrations, according to a set of instructions issued by the government to field officers in a move aimed at improving compliance. The standard operating procedures issued by the Union finance ministry on Tuesday instructs field officers to provisionally attach assets of registered GST assesses, including bank accounts, in cases where they think it is needed to protect the revenue interests of central and state authorities. Such attachments will be resorted to in cases where businesses do not file returns even after a notice is issued to them asking them to do so in 15 days. Officers will also proceed to assess tax liabilities of the businesses concerned using available information.
The instructions also authorise field officers to cancel the GST registrations. The Central GST Act allows cancellation of GST registration if businesses do not file returns for specified periods. In some cases, “based on the facts of the case, the commissioner may resort to provisional attachment to protect revenue…,” according to the instructions of the finance ministry. The move comes at a time when revenue collections and tax return filings are well below expected levels. Only 7.8 million of the 12.2 million businesses registered for GST as of June 2019 filed their returns for October, according to official data.
The efforts to improve compliance comes after the authorities remained lenient towards lapses in the initial two years of GST roll out to help businesses and traders migrate to the new indirect tax system. The central and state governments last week decided not to go ahead with any tax rate increase despite a shortfall in tax collections as it could discourage consumption when the economy is going through a slowdown. In recent weeks, federal tax body, the GST Council took a host of steps to enforce compliance.
These include further limiting tax credits to buyers of goods and services if their suppliers have not uploaded invoices and paid taxes. The council last week also decided to block e-way bills, electronic permits to transport goods, in case where businesses have not filed returns of their sales for two consecutive tax periods. It also decided to block fraudulently availed input tax credit in certain situations. These measures indicate that revenue pressures are now forcing the authorities to cut back the relaxations in procedures given to businesses. Some state finance ministers have already expressed disappointment about the repeated extensions given to businesses for filing the annual returns and the audit report for the year of GST roll out, FY18. The deadline for this is now 31 January 2020.