Indian businesses that paid most of their goods and services tax (GST) liability using input tax credit or reported asignificant variation in turnover are being queried by taxmen, a move that has irked industry and prompted it to petition the authorities against such tactics.
Tax officials have sent emails seeking information from businesses that paid over 95% of their dues using input tax credit to ascertain the key factors responsible for subdued GST collections.
These queries relate to a large variation in turnover reported, negative growth in central GST liability and a wide divergence in input tax credit between GSTR 2A and GSTR3B. In some centres, businesses have been even asked to furnish tax payment challans. GSTR 2A and GSTR3B are return forms.
The first includes all information related to purchases, the second is a simplified return form aimed at making life easier for filers. GST was rolled out on July 1, 2017. Tax experts said revenue pressure appears to be driving the inquiries.
“It will be good if the government looks into this issue and comes up with clear guidelines in terms of information which should be sought from businesses and the manner in which it would be used,” said Pratik Jain, national leader, indirect taxes, PwC.
In the revised budget estimate for FY19, the government pegged GST revenue at Rs 6.43 lakh crore, Rs 1 lakh crore less than initially projected. GST collections in February stood at Rs 92,247 crore. Collections in February are typically lower because of fewer days, and March is expected to see a pick up. Companies are peeved because tax authorities are said to be giving them too little time to respond to queries, apart from the high frequency of such emails seeking information.
“There is an increasing trend by the department to conduct such enquiries over an email, more so with revenue pressures at the end of the financial year,” said Bipin Sapra, partner, EY. “This needs to be avoided as there are proper mechanisms in law like annual returns and GST audit reports which are yet to be filed and which will provide the complete details being sought by the department.”
The Institute of Chartered Accountants of India (ICAI) western regional council has written to tax authorities questioning the practice. The authorities have been relying on multiple sources to verify information and ascertain whether there’s been any deliberate move to suppress tax payments. There have been multiple cases of companies trying to evade payments by submitting fake invoices to claim input tax credit.
The extensive use of information technology and an emphasis on making sure accounts were fully squared, ensuring input tax credit claims were legitimate, had been expected to reduce the scope for evasion and improve compliance. But the high number of suspected evasion cases has taken the authorities by surprise.
The authorities are seeking multiple details, some of which are readily available to them from the GST Network, said Jain. While inquiries should be made if there is asound basis for suspicion of evasion and action taken if it’s proven, it should not become a matter of habit that leads to the harassment of companies, he said.