GST enforcement: A fine balance in catching fraud, not harassing taxpayers

Categories: GST Recent News

It’s a tough balancing act for the Central government.

After giving leeway in the initial years, the Centre in November 2020 started a drive to deal with fraud and evasion

It’s a tough balancing act for the Central government. On the one hand, it is dealing with fraudulent activities of over Rs. 50,000 crore related to goods and services tax (GST). On the other hand, it is facing criticism for the stringent measures it has taken to curb fraud because it could increase the compliance burden for honest taxpayers.

After giving leeway in the initial years, the Centre in November 2020 started a drive in coordination with the states to deal with fraud and evasion. In the past 18 months, it has detected fake input tax credit (ITC) of over Rs. 50,000 crore.

The amount is astounding. Stakeholders and tax experts have applauded the efforts and the due diligence that went into it. The recovery, however, is below the anticipated levels. So far, the government has got Rs. 2,500 crore from the drive, following the booking of more than 6,700 cases and detaining over 600 people.

The government has tightened GST norms. But some of the changes have caused “inconvenience” to taxpayers, to say the least.

It might be mentioned here that for 11 months in a row, GST collection has been above Rs. 1 trillion, and the key factor that has contributed to this has been effective action against errant taxpayers.

Anti-evasion measures

Early this year the government made changes such as a higher rate for footwear and making online restaurant aggregators such as Swiggy and Zomato pay GST on the services provided through them. The nodal department the Central Board of Indirect Taxes & Customs (CBIC) has toughened GST rules on outward supplies. It has now become vital that the outward supplies in the GSTR-1 and GSTR-3B match.

It seems there is more to come. The GST regime is expected to see an overhaul with a ministerial panel, set up by the GST Council, proposing a slew of data analytics-led enforcement and registration measures to plug leakages and boost collection. The eight-member panel, headed by Maharashtra Deputy Chief Minister Ajit Pawar, is learnt to have prepared a report, which could be taken up by the Council in its upcoming meeting. The panel is believed to have suggested ways to identify fake invoices, dubious transactions, and high-risk taxpayers by using data analytics and machine learning. The proposed measures include biometric verifications and physical verifications of premises of high-risk businesses flagged by the system as a prerequisite for registration.

The panel has recognised integrating government databases is required to keep errant taxpayers in check. It is learnt to have proposed validating bank accounts through the National Payments Corporation of India (NPCI) data.

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