After rollback of GST Regime, a major decline in the revenue has been noticed. GST registered business received notices from the income tax department in the last few weeks as department noted decline in annual revenue by 20% or more over the previous year.
The department is now comparing comparing firms’ earning under GST with that of erstwhile service and excise regime. However, the series of notices are also targeting businesses that have genuine reasons for declining revenue which includes a slowing economy.
Till now, taxpayers were receiving notices related to mismatch only in declaration between GSTR-3B (summary return) and GSTR-1 (outward supplies detail) and it quite common to receive.
The department believes that behind the decline of sales, there could be the evasion of taxes under the new indirect tax regime. Hence, notices have asked businesses to produce relevant documents and explain the reasons for decline in sales.
The GST IT system is now throwing up many red flags when tax returns under different tax regimes are compared.
Department also trying to find out the actual reasons of sales decline from business through notices, like in one instance, a service provider for multinational companies received a notice but its revenue had reduced due to expiry of certain contracts.
In another notice, the taxpayer was asked to produce input tax credit documents as it had paid a substantial portion of tax liability through accumulated tax credit.
In order to track the tax evasion GST system generates a lot of data but not having a a full-fledged return system cause prone to exploitation through fake invoices for claiming additional credit and bringing down tax liability and the new return system is expected to come into force only from next year.
The tax department has estimated that evasion worth Rs. 1.2 lakh crore may have taken place under GST regime.
While the government had detected evasion worth over 12,000 crore since GST came into force two years ago, rule of thumb suggested that such detection were only 10% of the actual evasion taking place. The GST collection for central government in FY19 fell short of target by over 60,000 crore.
This prompted the government to set relatively modest budget estimate for the current fiscal at 11.89 lakh crore. This translates into an average monthly collection of just below 1 lakh crore. In the first four months of FY 20, the collection have kept pace with the required rate.