Rs12 lakh crore: That’s the scale of mismatch in the value of services declared by taxpayers in 2015-16, according to a new tax department analysis. The study has prompted the Central Board of Indirect Taxes and Customs (CBIC) to undertake a similar exercise for the demonetisation year of 2016-17, with the Board’s top tax officer, in a missive to field formations, asserting that the “sheer magnitude” of such a mismatch is “a pointer to the possibility of revenue leakage, which cannot be ignored”. The mismatch detected in the declared value of services in FY16 is nearly five times the service tax collections of that year. The gap was discovered by the department while analysing the data of both direct tax and indirect tax returns, with the discrepancy showing up on comparing the turnover on account of services as per the ITR/TDS data and the value of services declared in the corresponding service tax returns. The Board has now asked its field formations to verify the mismatch data for both 2015-16 and 2016-17 and take “necessary follow-up action”. “There is a considerable gap between the turnover on account of services as per the ITR/TDS data and the value of services declared in the corresponding service tax returns (above threshold of Rs 10 lakh). For 2015-16 alone, the mismatch is to the tune of approx Rs 12 lakh crore,” the missive stated. The total mismatch in the declared value of services is nearly five times the service tax collections of the respective financial year. To put the numbers in context, service tax collections in 2015-16 had stood at Rs 2.11 lakh crore and at Rs 2.55 lakh crore in 2016-17, government data shows. This mismatch has arisen on account of Permanent Account Numbers (PANs) that are “either not at all registered in service tax or PANs that are so registered but have not filed the service tax returns”, the missive said, adding that “in some cases, there is simply a value mismatch between the turnover declared in the ITR/TDS and the service tax returns”. The CBIC is of the view that this mismatch could have also arisen from “valid reasons”, such as exempted or exported services not being declared in the service tax returns, missing service tax returns, reverse charge mechanism (RCM), services outside the scope of service tax etc., but the magnitude of the mismatch may be a pointer to revenue leakage. Tax experts said though service tax has been subsumed under the new indirect tax regime of Goods and Services Tax (GST) regime, taxmen can reopen cases related to audit and recovery up to previous five financial years. They further said that though a similar data analysis is being carried out on GST front to check tax evasion, the matching of service tax returns with income tax returns is a step ahead because it reflects the synchronisation between the direct and indirect tax departments. A targetted, data analysis-based drive is already being carried out by CBIC since January through analysis of data of GST returns, in an attempt to shore up revenues to meet the targets. For the financial year 2018-19, the GST revenue for the Centre along with direct tax collections have fallen short of the revised Budget estimate, mounting fresh pressure on the government’s attempts to meet its fiscal deficit target of 3.4 per cent of the GDP. For the 2019-20 fiscal, the GST collection target has been budgeted at Rs 13.71 lakh crore, which as per officials is an equally steep target to meet.
