CBIC uncovers fake tax credit claims worth ₹38,000 cr since last November

The Central Board of Indirect Taxes and Customs (CBIC) has uncovered 38,000 crore of false claims for input tax credit from firms since last November as part of a technology and data analytics-enabled push against tax evasion, according to a person familiar with the issue.

The CBIC’s year-long compliance drive demonstrates the potential of the goods and services tax (GST) in broadening the tax base significantly, which is one of the primary goals of the 2017 indirect tax reforms.

Several factors have previously influenced tax revenue collecting. These include subsequent rounds of tax rate reduction, less strict compliance enforcement following the implementation of GST, and the progressive loss of economic growth momentum from 8.2 percent in the fourth quarter of FY18.

The year-long compliance campaign, together with several policy changes such as e-invoicing and a dramatic drop in the availability of tax credits where reporting criteria are not satisfied, has contributed to an increase in GST revenue collections.

GST officials at the federal and state levels are verifying requests for tax credits using data from several agencies, including data on truck travel collected at toll plazas.

According to the person described above, the compliance enforcement drive has assisted in detecting instances of invoices being used to report purchases without the items or services actually being given, as well as incidents of clandestine removal of supplies from factories.

The improvement in revenue collection seen in recent months has been attributed to better compliance as well as a resurgence in economic activity by both the federal and state governments. The CBIC has already directed field officials to gently remind all taxpayers to complete their forms and pay their taxes on time. This would assist enhance November GST receipts in comparison to October, which were already the second highest since the GST rollout. According to e-way bill data accessible from GSTN, the business that processes GST returns, November GST receipts are on track to set a new high.

To supplement GST revenue receipts, the central and state governments are now looking into improved use of technology and likely GST slab rationalisation. A ministerial panel led by Maharashtra deputy chief minister Ajit Pawar is looking for new ways to prevent revenue leakage due to tax fraud, while another chaired by Karnataka chief minister Basavaraj Bomai is looking into prospective slab changes. In an interview last week, a member of the Bommai committee told Mint that the final decision on tax slab modifications had not been taken and that an impact assessment was required before completing the suggestions.

Source: Money Live Mint