The Directorate General of GST Intelligence (DGGI) has nearly completed investigation of all the pre-GST tax evasion cases pertaining to the erstwhile service tax and central excise, and is likely to disband a dedicated unit which was established for that purpose very soon, said an official source.
In the past one year, it has completed the investigation of nearly 300 cases of tax-evasion, and as per sources the cases probed are of worth over Rs 5,000 crore. “The recovery in those cases so far have been of a few hundred crores,” an official said.
The cases probed in the past year are largely of power, automobile, and infrastructure sectors. “Less than 50-60 cases are remaining to be investigated. Most likely by March-end, this unit (for probing pre-GST cases) will be disbanded,” the official said.
Prior to July 2017, the DGGI was known as the Directorate General of Central Excise Intelligence (DGCEI), which functioned under Central Board of Indirect Taxes and Customs (CBIC) as its apex intelligence wing. The DGCEI was tasked with collection, collation and dissemination of intelligence relating to evasion of central excise and service tax on an all India basis.
Harsh Shah, partner at Economic Laws Practice (ELP) said that there were several sector based issues for which notices have been issued, such as tax on construction services for existing members in case of redevelopment, tax on liquidated damages in infrastructure contracts, etc. “Being sector based issues, the implications affect a lot of players in the sector and hence likely to constitute a significant amount of tax collection,” he said.
Another official said that in some cases, the tax evasion amount is as high as Rs 500 crores. “The recovery will be done in subsequent months…some cases are pending in courts too.”
Sudipta Bhattacharjee, partner at Khaitan & Co, however, said that if taxpayer receives a show cause notice now/in the coming days under service tax or central excise for the pre-2017 period it would be pertinent to review such notice(s) carefully from a “limitation period” perspective. “The limitation period for issuance of any such notice is likely to have expired a while ago, even factoring the extensions on account of COVID,” he added.
The DGGI, meanwhile, has detected 6,084 cases of evasion in 2023-24, amounting to Rs 2.01 lakh crore, which is double the amount detected in the previous fiscal, according to its annual report for FY24. The report showed that online gaming, and BFSI are the sectors most prone to evasion. In FY24, Rs 81,875 crore evasion was detected in the “real money online gaming” sector, and Rs 18,961 crore in BFSI.