Stepping up its anti-evasion drive, the goods and services tax (GST) wing of the Central Board of Indirect Taxes and Customs (CBIC) has started a process of issuing show-cause notices to thousands of entities for alleged evasion or under-payment of tax.
It has already issued notices in about 20,000 cases among 34,000 scrutinised for tax evasion in 2017-18, the year in which the comprehensive indirect tax was rolled out, sources said. The tax department reckons that evasion by the entities in the year were to the tune of Rs 2,000 crore. It is also sending out notices to another lot of 35,000 cases for the year 2018-19, the sources added.
“Based on their explanation, we will decide whether the demand has to be confirmed or the show cause notice has to be closed,” a senior official told FE.
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Of the 34,000 cases selected for 2017-18 based on risk parameters, in 95% of cases, scrutiny has been completed and in 50-60% of cases explanations have been sought for short tax payment, the official said.
With the GST rate rationalisation delayed to 2024, the CBIC is stepping up scrutiny and audit of GST returns to curb fraudulent availing of input tax credit (ITC) and tax evasion, to boost tax receipts through better compliance.
The selected business entities are being looked at to see consistency in the information filed by businesses about input supplies, output supplies, input tax credits and tax payments.
During the scrutiny exercise, the interface with the taxpayer are being minimal and data is made available through various sources like the Directorate General of Analytics and Risk Management, Advanced Analytics in Indirect Taxation, GST Network, and e-way bill portal, among others, are being relied upon for this purpose. Income tax payments by these businesses are tallied at the back end also to see if there is any discrepancy or not.
Increased scrutiny and audit are leading to greater compliance, which is reflected in GST collections. Average monthly GST collections rose to Rs 1.49 trillion/month in the first seven months of the current financial year compared with Rs 1.23 trillion/month in full FY22. Higher GST mop-up means the Centre could garner up to Rs 1.5 trillion extra than budgeted in Central GST (CGST) in FY23 while states together would corner a little more than that in additional receipts, boosting much-needed resources to fund programmes.
The GST revenue neutral rate (RNR) made before the GST roll-out in July 2017 was 15-15.5%, but the average GST rate at present is around 11.5%.
The proposed GST slab rationalisation aimed at increasing the average GST rate will likely be delayed to 2024 due to the spate assemble elections in 2023 in the run-up to national elections in April-May 2024.