The government will take steps to prevent evasion of Goods and Services Tax (GST) by entities abusing the flexibility given to businesses to correct errors in transaction, revenue secretary Sanjay Malhotra said in an interview.
This will be done by proper validation of transactions and claims without affecting genuine tax payers. The move is part of efforts to ensure that tax revenue collection grows faster than economic growth rate in nominal terms.
The government will also integrate the IT platforms used by customs authorities and GST authorities for scaling up tax compliance using data analytics.
At present, each authority uses its own IT system.
The government predicted a revenue buoyancy of over one in the interim budget for FY25, implying faster tax revenue growth compared with the economic growth rate.
The interim budget for FY25 has projected that the Centre’s gross tax revenue will grow at 11.5% over the revised estimates for FY24, while Gross Domestic Product (GDP) is projected to grow at 10.5% in nominal terms, leading to tax buoyancy forecast of 1.1.
“We have a lot of data on direct and indirect taxes. But there are still pieces where we need to work upon and need to make more effective use of data. With this, we hope to sustain tax revenue buoyancy,” said Malhotra.
“We will make use of information available and curtail the facility of editing downward the liability to pay taxes by the seller and the flexibility given to increase the input tax credit by the buyer.”
Malhotra explained that some unscrupulous entities game the system, abusing the flexibility meant for businesses to correct errors and the flexibility in the extent of the tax credit they can claim.
For example, a person who sells something for ₹2 million and is liable to a 5% GST, has to pay ₹100,000 as GST.
Some sellers, however, do not pay the full amount payable to the government. Although the authority has information about the transaction details (because it is filed online), some entities do not pay the correct amount of tax by abusing flexibility given to correct for any errors in the invoice.
The reverse too can happen where a dishonest buyer claims the seller has made a mistake in making the invoice. “GST has given the flexibility to the buyer to make upward revision in the input tax credit available,” Malhotra said.