Tax authorities working on list of suspected evaders on zonal basis

Officials on Wednesday arrested two people for being allegedly involved in fake invoicing

Written by Aanchal Magazine | New Delhi | Published: March 2, 2018 1:06 am
Tax authorities working on list of suspected evaders on zonal basis The Central Board of Excise and Customs is scrutinising GST returns filing and has zeroed in on suspicious transactions especially those where input tax credit is being availed via fake invoices.

Setting the ball rolling on legal action against those evading taxes under the goods and services tax (GST) regime, the tax authorities are compiling a list of suspected tax cheats on a zone-wise basis to step up the punitive action from its end. On Wednesday, the tax authorities made the first set of arrests in the case of two firms that had allegedly been indulging in fake invoicing.

The Central Board of Excise and Customs (CBEC) is scrutinising GST returns filing and has zeroed in on suspicious transactions in sectors including iron and steel, tobacco, construction, consumer goods, especially those where input tax credit is being availed via fake invoices in absence of actual business activity, a senior government official said.

“Large companies/taxpayers contribute to about 90 per cent of the taxes filed and are not much of a concern. The revenue slippage is happening on account of rest of the taxpayers. In some places, people are dealing specifically in generation of fake invoices to help the taxpayers to avail input tax credit wrongly,” the official said.

Citing an example, the official said that in a company showing business of Rs 45 crore, the tax payment in cash totalled to only Rs 20,000, while the rest of the tax liability has been set off through availment of input tax credit. “With a certain level of business turnover, there will be some value addition and some portion is liable to be paid as tax. But, some of the taxpayers are subverting the system to only utilise input tax credit through generation of fake invoices,” the official said.

The department is also looking forward to the implementation of invoice matching and e-way bill as anti-evasion tools to plug revenue leakages and boost tax collections under GST. “The monthly revenue collections seem to be stabilising around Rs 86-87,000 crore. With the rollout of e-way bill and invoice matching, it’s possible for monthly GST revenues to go up to over Rs 1 lakh crore,” the official added.

Earlier this week, CBEC Chairman Vanaja N Sarna had told The Indian Express that a long time has been given to GST taxpayers to come forward and rectify their mistakes and the department will now redouble efforts to identify deliberate tax evasion by going beyond proposed measures such as invoice matching and e-way bill. “If there are unscrupulous traders, they need to be booked now because a long time has been given to them to come forward, get all their doubts cleared. Sewa Kendras have been there for their assistance. And after all that they are still breaking law. Naturally my officers have to get there,” she had said.

She had also said that “unscrupulous” and “truant” taxpayers need to be booked. “Since it is the new law, there might be a valid mistake which can be sorted out by discussion for which they may have a valid explanation. But if not, then naturally I’ll issue the notice. Don’t want any major shakeup, people should not say that I was a genuine guy, but then you have made a case against me. Will soft peddle into this. But, it has to happen. Cannot allow truant and unscrupulous characters to go around and keep doing things as they want,” Sarna had said.

On Wednesday, the tax authorities arrested directors of two firms — Sanjiv Pravin Mehta, director of Shah Brothers Ispat Pvt Ltd, and Vinaykumar D Arya, Director of VN industries, Darukhana, Mumbai — under provisions of the Central GST (CGST) Act for availing ineligible credit of Rs 5.20 crore and Rs 2.03 crore, respectively. The two firms allegedly indulged in only paper/invoice movement and no actual goods changed hands.

The Finance Ministry on Thursday issued a statement assuring “compliant taxpayers” of no such punitive action in carrying-out their day to day operations. “The power to arrest is to be exercised where there is deliberate fraud of sizeable magnitude with intent to evade tax. It is meant to serve as a deterrent to unscrupulous elements in trade who may try to defraud the system. There are sufficient checks built into the law to ensure that inadvertent or procedural lapses do not attract severe punitive measures,” the ministry said.

The Central GST (CGST) Act has provisions for arrest when a taxable person has suppressed any transaction relating to supply of goods or services or has claimed input tax credit in excess of his entitlement or the person has transported goods of a warehouse/godown which have escaped payment of tax. Commissioner level officers can exercise powers for arrest under the CGST Act. Tax evasion or wrong availment of input tax credit over Rs 2 crore can lead to arrest and over Rs 5 crore is a non-bailable offence with a fine and imprisonment for a term which may extend to five years.

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