GST fraud: Probe body seeks e-surveillance powers

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Updated: April 7, 2019 6:55:35 AM

In the pre-GST regime, the organisation was tasked with gathering intelligence on companies that came under the excise and service tax regime.

GST Tax, gst probe body, e-surveillance, news, economy, newsGST probe body plans e-surveillance to check fraud (Reuters)

The apex anti-evasion body under GST, Directorate General of GST Investigation (DGGI), has asked the government to allow it to intercept electronic communication dynamically to improve its success rate in apprehending tax evaders. Currently, 10 government agencies, including Directorate of Revenue Intelligence (DRI), can intercept, monitor and decrypt information transmitted or stored in any computer after requisite permissions.

DGGI argues that it needs such a power to track slippery traders, who often pretend to run a genuine business but have no real assets on the ground. In the pre-GST regime, the organisation was tasked with gathering intelligence on companies that came under the excise and service tax regime. These firms have physical assets on the ground and evaders among them can’t disappear overnight.

“Earlier, even if the promoter of a manufacturing firm fled after evading taxes, tax officials could recover some value from physical assets. But in case of traders, officials conducting raids end up with empty warehouses along with a small number of insignificant employees. There is no recovery in such cases leading to revenue loss for the government,” an official said on condition of anonymity. He added that DGGI can act in real time and catch such fly-by-night traders if it was given DRI-like powers.

As per the Central Board of Indirect Taxes and Customs, during April-February period of FY19, the department detected tax fraud of nearly `20,000 crore. It managed to recover half the amount through enforcement measures, it said.

Another central tax official said officials at the level of assistant commissioners can request for permission to check the digital records of an assessee, including email accounts and phone messages. But past records only confirm tax evasion, they don’t help in real-time when arrests are to be made, he added. Among other changes in GST enforcement strategy, the department is also mulling a more frequent audit cycle instead of conducting it annually, as is the practice.

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Officials said the audit forms can be designed to ensure compliance. This is in line with international best practices in taxation and could go a long way in preventing evasion, another official said.

Officials who were part of the deliberation on measures to curb evasion through fake invoices said the indirect tax department was concerned about the possible exploitation of integrated GST refunds availed by exporters through illegal bills. Unlike the earlier regime, exporters pay the relevant IGST on value of exports and then claim the reimbursement as exports do not attract GST.

However, given that exports are controlled by the Customs department, the GST officials said the fully automated online system which approves refunds is being gamed by some exporters. This could be plugged by getting GST officials as part of the vetting process.

Although the fully online and centralised GST system is better at collecting data and detecting evasion than the previous regime, the lack of full-fledged return-filing system has created gaps in the original design of the system. It’s expected that GST Network – which runs the IT backbone for the tax regime – will implement a simplified and comprehensive return-filing and invoice-matching system for more robust detection of fraud.

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