6 Years of GST: GST Monthly Revenue hits Rs.1.5 Lakh Crore mark; Focus now to Curb Tax Evasion

Six years after the implementation of India’s largest indirect tax reform, monthly GST revenue of 1.5 lakh crore has become the new normal, and tax officers are focusing on dealing with fraudsters who are adopting newer methods to game the system, causing loss to the exchequer.

Tax officers have begun using data analytics, artificial intelligence, and machine learning to apprehend black sheep who operate as syndicates and create fake entities on the basis of forged documents to claim input tax credit (ITC), with the goal of reducing evasion, which has totaled over 3 lakh crore since the inception of GST. In 2022-23, it reached more than 1 lakh crore.

The most essential pending GST reform is the upgrade of the GST Network to avoid fake supply and fraudulent ITC claims. Data analysis and physical checks alone will not address the situation. The GSTN should allow buyers to link invoice level information filed for ITC claims (from GSTR 3B) with information given by input suppliers (GSTR 2A and GSTR 2B).

Despite six years of GST implementation, concerns such as the rationalisation of tax rates and slabs, as well as the introduction of GST on petrol, diesel, and ATF, remain unsolved. Tax experts feel that the GST Council should pursue these improvements in order to make GST more inclusive. However, with an election year approaching, it is doubtful that the Centre and state governments will proceed with these measures.

There are some of the areas on which the industry expects more clarity from the GST Council and should be prioritised are the levy/applicability of GST on Winnings from Online Gaming; transactions involving cryptocurrency; EV charging infrastructure; and the establishment of GST Appellate Tribunals.

Since its inception in September 2016, the GST Council, led by the Union Finance Minister, has met 49 times. The council is made up of finance ministers from all states and union territories, as well as the Union Finance Ministry’s Minister of State. On July 1, 2017, the countrywide GST, which replaced 17 local levies and 13 cesses, went into effect.

The GST system has a four-rate structure, with basic commodities exempted or subject to a low 5% tax, while luxury and demerit goods pay the highest rate of 28%. The remaining tax brackets are 12% and 18%. Furthermore, a 3% special charge applies to gold, jewellery, and precious stones, and a 1.5% special rate applies to cut and polished diamonds. Furthermore, a cess is levied on luxury, sin, and demerit products that fall outside the 28% tax bracket.

Prior to the implementation of the GST, the combined effect of VAT, excise duty, CST, and cascading taxes resulted in an average tax burden of 31% for consumers.

Monthly GST revenues, which were 85,000-95,000 crore when GST was introduced in 2017, have risen to approximately 1.5 lakh crore and are trending upwards. In April 2023, revenue reached an all-time high of 1.87 lakh crore.

With monthly revenues steadily increasing, GST authorities are now concentrating their efforts on apprehending fraudsters and reducing tax evasion.

CBIC has initiated a two-month special drive to root out fake GST registrations and catch the mastermind behind all tax evasion cases.

GST Network has found 60,000 businesses that may have false registration. Physical verifications of 43,000 organisations have been performed by central and state tax authorities through visits to company sites.

Following this, tax officers discovered 11,140 bogus GST registrations, resulting in GST evasion of over 15,000 crore during the first month of the drive. It is said the current loophole in the system permits purchasers to claim ITC without getting supplies from illegal vendors.

Between July 1, 2017, and February 20, 2023, GST officials arrested 1,402 people for tax evasion.