In just over two years of the indirect tax regime, fake firms, fraudulently generated invoices, and false claiming of input tax credit have been the biggest problems for the Goods and Services Tax (GST) administration. So what exactly went wrong with the biggest tax reform implemented in July 2017 that was expected to create an electronic trail of all transactions through a seamless chain and hence make evasion tough?
There could be several things: failure in using technology to act as a deterrent against evasion, initial absence of oversight and supervision, and lack of return forms that support matching of invoices and weeding out any fake transactions. Since the rollout of GST, tax evasion has been rampant, with taxpayers using ingenious ways to evade the indirect tax. Tax authorities have detected multiple modus operandi and have been using technology and data – from GST returns and e-way bills – to keep a check on evasion.
After overlooking evasion for the first fiscal of GST implementation, in order to help taxpayers adjust to the new regime, the Central Board of Indirect Taxes and Customs (CBIC) started an enforcement drive that bought many tax evasion cases to the light. According to the CBIC data, in 2018-19, the central tax authorities registered over 1,600 cases amounting to ₹11,251 Crore, as opposed to ₹13 Crore in the nine months ending 31st March 2018.
Reflecting the increase in enforcement action being taken by the authorities, over 6,000 such cases were filed until November 2019. Now, the government is planning to use data analytics to re-look at all refunds since 2017, watching out for cases of unscrupulous refund claimants or shell companies created to claim the fake input tax credit.
The introduction of e-invoicing and the new GST return system in the upcoming fiscal are some of the measures being taken to curb tax evasion. In the 37th GST Council Meeting, it was decided that new return forms will come into effect for all taxpayers from April 2020.