Businesses used to under-report their turnovers and investment sizes, sometimes floating new companies and carving out part businesses to them, in order to continue to enjoy assorted benefits meant for MSMEs. This has resulted in the government enlarging the definition of such firms, a move that is also in sync with the intent to encourage start-ups and other employment-intensive units to scale up.
Now, a similar trend is under way among goods and services tax (GST) assesses. The GST administration has found that many businesses with annual turnover above Rs 5 crore wrongfully declare themselves to be below that threshold in order to avail themselves of several compliance-related relaxations.
It has sent notices to a large number of such firms, saying that their compliance deadlines would be reassessed, based on the tax department’s own computation of their annual turnovers. Since its inception, the GST Council has progressively eased compliance burden for smaller businesses including the requirement to file the form GSTR-1 (outward supply) only once in a quarter for those with turnover below Rs 1.5 crore.