• Notification Date: 17-02-2023
• Notification No: N/A

GST Audit Uncovers Tax Evasion of ₹22000 crores from 48,000 cases

The indirect tax administration’s audit of the GST revealed tax evasion in approximately 48,000 cases amounting to ₹22,000 crore. For increasing the revenue base, the indirect tax authority is now looking at corporate tax returns submitted by companies to the income tax department as well as data on GST registrations. The goal is to find corporations that should have registered for GST but did not. 

According to the Central Board of Indirect Taxes and Customs (CBIC) Chairman, there is no plan to reverse the Finance Bill’s clarification that input tax credits will not be available for corporate social responsibility spending. Regarding GST automation, it was stated that taxpayers would find it easier as the process of filing returns becomes increasingly automated. Unlike income tax, in GST, the tax return is constructed based on transaction-level data. With the introduction of e-invoicing, we are now capturing electronic invoices for business-to-business transactions on the system, and we have gradually reduced the threshold to ₹10 crore. Any business with a turnover of more than ₹10 crore is required to generate E-invoices electronically for their business-to-business transactions. It helps us to construct that taxpayer’s return. 

The administration has discovered a significant inconsistency regarding the use of ITC. According to them there is certain gap in the compliance:  

1. Taxpayers may have claimed ITC for inputs for which credits are not allowed due to an incorrect interpretation of the legislation.  

2. The value of the goods is not properly declared.  

3. Misclassification i.e., the wrong rate of tax has been applied. The GST base is not too wide and big. According to different data, there are many businesses that must register under GST. To widen the GST base, there are two strategies proposed by the government.  

They are: 

1. Use data triangulation to compare the Income Tax and GST payer base of business and identify taxpayers who should also be registered under GST.  

2. To outreach; that is the government will educate the potential taxpayers on the importance and benefit of GST.  

For the Financial Year 2023-24, the administration side has proposed to simplify the customs rate structure by reducing the number of rates from 21 to 13. With a more basic fee structure that will improve clarity and decrease conflicts, this action is meant to indirectly assist importers. By value, capital goods, intermediates, or raw materials account for about 85% of imports. It was mentioned that the denatured ethyl alcohol used in the production of numerous compounds was given a full exemption in the current Union Budget 2023. Similarly, exceptions were given to the inputs of the mobile phones which will be helpful for the manufacturers. 

In contrast to income tax, the GST tax return is built using transaction-level data. Since the implementation of e-invoicing, it steadily lowered the threshold to 10 crore and are now recording electronic invoices for business-to-business transactions on the system. For business-to-business transactions, every company with a turnover of more than Rs. 10 crore is required to create electronic invoices which aids in the development of that taxpayer’s return.