The government has detected the evasion of Goods and Services Tax (GST) over Rs 45,000 crore during the financial year 2018-19. According to the data made available by the finance ministry, the tax authorities have recovered Rs 25,000 crore of this amount during this period. In total, the revenue department of the ministry has registered around 37,000 cases in the last fiscal.
The cases of misconduct registered by the tax authorities range from misdeclaration, misuse of Input Tax Credit (ITC) to non-filing of GST returns. One of the most common cases of evasion is the use of fake invoices. Around 2,000 cases of fake invoices totaling Rs 8,000 crore were registered during 2018-19. Of the total tax evaded on account of fake invoices, tax officials have recovered Rs 736 crore.
According to the experts, this could be a small percentage of the actual tax leakage that takes place in the system. There are, however, no formal estimates to show the possible tax evasion which takes place in the country. Regarding this matter, a former professor of Economics said, “What one can say about gold smuggling is that 3-10% of the smuggled amount of gold gets detected. Similarly, only a small percentage of GST gets detected. But it is difficult to say the same for GST unless there is a proper study.”
Given the complexity of GST, it can be difficult to detect tax evasion. The professor added, “The complex system lends itself to tax evasion. Many items are exempt from taxes which breaks the chain. For example, wheat is exempt, flour is not. You can evade taxes on the amount of wheat you are buying and therefore not pay on the flour you sell by under-invoicing. There are many other items like these that are tax-exempt. This enables the generation of fake invoices. Tax leakage takes place further when people on the basis of fake bills claim fake credit through ITC.”