In an attempt to prevent the evading of tax under the Goods and Services Tax (GST), the government is looking into an automated system to tag risky taxpayers. This method might allow the council to profile taxpayers based on their risk profile. If an assessee is identified as ‘risky’, he/she could face restrictions on issuing invoices, utilization of input tax credit (ITC), and approval of refunds.
After the launch of GST two years ago, the government has been struggling with the issue of tax evasion through fake invoices. The indirect tax department has detected a substantial amount of frauds being committed. The GST Council has formed a 10-member Committee of Officers (COO) on Risk-Based Management of Taxpayers under GST regime.
The committee has been tasked to study, examine and suggest the procedure for assessing the financial credibility of a taxpayer in relation to his/her GST profile and also recommend various threshold limits for such taxpayers. The committee of officers is instructed to submit its report within a month.
As per the terms of reference (ToR) on the memorandum dated July 15, the committee will also suggest changes in GST law and rules to enable the profiling and regulating of risky taxpayers. In case of failure to undertake the desired know your customer (KYC) verification, there could be the invocation of penal provisions. Furthermore, the office memorandum stated, the panel needs to suggest “measures for the implementation of suggested risk-based management on an immediate basis and any other measures, mechanism, and machinery to check and curb multiple types of frauds.”
To boost the GST revenue, the government is looking for pre-emptive mechanisms and detect the likely instance of frauds even before it takes place. Due to the marginal growth of Indian economy this fiscal, the government might fall short to reach the expected GST collections target. Hence, anti-evasion measures could increase the efficiency of revenue collections. In addition to economic slowdown making a dent on its growth, the government is also dealing with revenue leaks due to multiple frauds with the issue of fake invoices.