The Central Board of Excise and Customs (CBEC), according to sources, has shared the list of such entities, along with the returns filed and transitional credit claimed, with the field officers.
This exercise is aimed at checking “unreasonable” transitional credit claims by those who have taken GST registration in the run up to the roll out of Goods and Services Tax from July 1, 2017.
It is apprehended that several traders and small businesses obtained registration under the GST to claim excise and service tax credit which was only available to manufacturers in the erstwhile excise, service tax and VAT regime.
According to the sources, preliminary scrutiny indicated that several newly created LLPs and HUFs as well as proprietary firms have claimed transitional credit for which they were not eligible.
The CBEC has already asked chief commissioners to scrutinise all transitional credit claims of over Rs 1 crore.
As part of transition to GST last July, taxpayers were allowed to file Form TRAN-1 and avail tax credit on the basis of closing balance of the credit declared in the last return under the pre-GST regime.
According to the revenue department data, as much as Rs 65,000 crore of transitional input tax credit was claimed by businesses as on September 2017.
Taxpayers operating in the form of private limited companies normally are categorised as organised players, and are required to periodically file records with the corporate affairs ministry.
Such companies are mandated to audit their accounts and hence the possibility of indulging in any dubious activities for short-term gains are more risky for them, compared to proprietors, partnership firms and HUFs as these entities are not required to file information with the ministry, experts said.
“Qualms raised by CBEC on non-corporate entities is based on their experience, where number of tax evaders have operated out of bogus proprietary concerns, partnership firms or HUFs in the past,” AMRG & Associates Partner Rajat Mohan said.
PwC India Partner and National Leader (Indirect Tax) Pratik Jain said probably the CBEC’s action is based on some information about entities taking registration for using or passing on GST credit which was otherwise not permitted.
“It is clear that data available with the government will now be extensively used for anti-evasion measures,” Jain added.