Taxpayers’ FY18 Books To Be Audited To Curb GST Evasion
The taxman has initiated audit of some taxpayers’ books for 2017-18—the year goods and services tax was rolled out—to check evasion and act against evaders who are fraudulently gaming the system.
The Central Board of Indirect Taxes and Customs has issued notices to some businesses for initiating audit under the said period, a government official told BloombergQuint on the condition of anonymity. The businesses, the official said, have been asked to share accounting details and income tax returns, among other particulars, in accordance with Section 65 of the CGST Act, 2017.
This comes at a time when the government seeks to curb GST evasion and improve tax revenue. A panel would be set up that would suggest measures to curb evasion and fraudulent refund claims, the government said yesterday.
Section 65 of the CGST Act gives powers to tax officers to audit any registered business for non-payment or short payment of tax or claiming of erroneous refunds and input tax credit.
The taxpayers will have to share information sought by the department to verify their account books, according to notices issued by the tax department that were examined by BloombergQuint.
Businesses have been asked to share their annual financial statements, bank account details, balance sheets, profit and loss statements, income tax returns, copies of GST returns, among others, according to the notices. Other details include input service suppliers, capital goods suppliers, invoices, debit and credit notes, mergers or acquisitions, if any, among others.
If taxpayers are found guilty of avoiding payment or short payment of tax, or claiming of erroneous refunds and input tax credit, they will have to pay the tax due along with interest and penalty, according to Section 65 of CGST Act.
Taxpayers are required to file their annual and audit reports for 2017-18 by Jan 31, 2020, in GSTR-9 and GSTR-9C forms.
According to the law, these audits can be conducted on taxpayers with annual turnover over Rs 2 crore, and for cases where the GST system throws red flags due to mismatches or non compliance. These mismatches are seen every month in total number of GST taxpayers, and those who actually file returns, according to another government official.
The number of such notices issued to taxpayers could not be ascertained, however such notices have been sent to both filers and non filers of FY18 audit returns GSTR-9C, deadline for which has been time and again extended.
The tax authorities have commenced GST audits for taxpayers even when some companies may not have yet filed their GSTR-9 and GSTR-9C, said Ritesh Kanodia, a partner at Dhruva Advisors. “This was expected considering the revenue deficit pressure that the government is facing, and an increased focus on augmenting revenues.”
The present drive seems to primarily target taxpayers against whom the government could be in possession of specific information on suspected tax evasion, fake refund and illegitimate input credit claims, said Krishan Arora, a partner at Grant Thornton India LLP.
However, Abhishek Jain, a partner at EY India said in various cases, the taxpayers would have made genuine input credit claims, the verification exercise could help in identifying fake credit claims, credits of tax not paid to government.
There could also be other interpretational issues that might crop up in the future regarding related party transactions, valuation and tax payment, Kanodia of Dhruva Advisors said.