These days, GST is in the news for all wrong reasons - the latest in this series is tax disparities in the returns.
Indian government is fronting garden-fresh qualms of businessmen evasion of taxes as the Indian Income Tax authorities (IT) are tackling with INR 34,000-crore GST enigma.
This enigma is a gigantic repercussion to the GST regime and adding insult to the injury - the World Bank has rated GST among most complex tax structure amid 115 countries employing indirect tax regime identical to the GST.
The magnitude of the under reporting of tax liabilities estimated to be around INR 34,000 crore which is detected during the preliminary analysis of the returns filed during the period (July-December, 2017) of the GST regime.
Traders and businessmen may be dispensed notices by concerned authorities for showing different liabilities in GSTR-1 application and GSTR-3B application with the emphasis on empathy of the applicants who filed two filings reflecting wide variance in the liabilities.
The reason for this catastrophe is that the government botched to execute most of anti-evasion measures (invoice matching to track the value of sales and purchases or e-way bills to keep tabs on movement of goods from factories to showrooms) to perfection and as a consequence, businessmen adopted proscribed strategies to evade the taxes under the GST regime.
Some experts opine that the businessmen did not expect that the government to tally the GSTR-1 and GSTR-3B to identify the disparities. Others are of the judgment that there might be valid reasons for wide disparities in the two filings.
However, this is not the only area of concern for the Central Government. It has also been exposed by the customs department (during the data analysis) that the value of the imported products was shown lower in several cases with the objective to pay lower GST at every stage of the sale process.
One of the options to pinpoint the cause for the discrepancies in the two filings will be comparison of physical copies of the filings. With the enhanced emphasis on the analysis of the data ensuing from the diversified GST filings, the revenue figures evaluation of the filings may aid in cracking the ongoing enigma (under payment of GST cases).
An in-depth analysis of all GST filings is need of the hour to detect the whys and wherefores for the wide deviation in the data of the GST filings filed by the same person. The concerned authorities should be fully equipped and armored to hunt down defaulters and fraudsters in the GST regime to cleanse the GST network.
In order to prevent the repetition of these fraudulent practices adopted by the businessmen, the Central Government should build robust administrative mechanism in place for the strict implementation of the laws and to take stringent measures to punish the defaulters under the GST regime.
It is high time for central government to take curative measures on warpath to confirm the regulations are meritoriously implemented to cleanse the GST network to minimize the damage or else it will have deep negative impact on the growth prospects of the nation and most importantly genuine tax payers will be unable to find trust in the taxing system which is not a good sign for the future of the nation.
Research and inputs by Paruchuri Baswanth Mohan
About the Author:
Bhumesh Verma is a lawyer with over 2 decades of experience in advising domestic and international clients on corporate transactions (M&A, Venture Capital, Private Equity, Startups, corporate advisory, etc.) and features in "The A-List - India's Top 100 Lawyers" by India Business Law Journal. He keeps writing frequently on FDI, M&A and other corporate matters and is a guest faculty as well. He can be reached at firstname.lastname@example.org