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About 1.2 trillion tax evasion cases have been detected and as many as 59,000 entities identified for verification in order to ascertain whether they are fake.
The investigation arm of the Goods and Services Tax (GST) authority has issued over 20,000 notices pan-India for assessment year (AY) 2017-2018 to AY2021-2022, involving tax demand of over Rs 80,000 crore (Rs 800 billion), according to an initial estimation.
The Directorate General of GST Intelligence has shot the notices for a wide range of issues, including alleged shortfalls in tax payment, reversal of input tax credit (ITC), and interpretation of certain legal provision affecting a large number of taxpayers and businesses.
Maximum number of show-cause notices were time-barred for August 5, for AY2017-2018.
The investigation agency was mandated to issue notices at least six months before to the end of the five years. Consequently, notices were sent out before August 5 and final orders are anticipated by February 5, 2025.
"These involves pre-GST notices which may or may not be converted into GST notices, depending on the response of the companies," an official privy to the matter said. Notably, deadline for AY2018-19 is June 30, 2025.
The notices were served under Section 74 of the Central GST Act, seeking response on the alleged mismatch in the sales data reported in the GST returns with that in the annual financial statements.
"GST show-cause notices have been issued across businesses, pursuant to both audits and investigations, making it essential for businesses to respond in a time-bound manner," said M S Mani, partner, Deloitte.
"Such responses will require collation of previous period data, reconciliations with accounting records and other tax data and appropriate interpretations -- all of these need significant time and efforts from businesses," explained Mani.
Section 74 of the CGST Act provides that a notice can be issued by the relevant authorities to recover tax potentially underpaid or unpaid, or refunded in error, for reasons of fraud, wilful misstatement, or suppression of facts to evade tax, under the extended period of limitation.
Over the years, stricter disclosure requirements, such as e-invoices for business-to-business transactions, enhanced data collection, and digitised payment system, aided tax sleuths to improve compliance.
Some of the sectors that have been served notices include foreign airlines, shipping companies, insurance firms, online gaming companies, information technology entities and many more.
However, time and again, the Central Board of Indirect Taxes and Customs (CBIC) intervened and issued guidelines to promote uniformity in GST notices as well as for audit exercise.
The instruction mandates zonal chief commissioners to consult GST policy experts when facing interpretative challenges.
"This move aims to create a more predictable business environment by reducing inconsistencies in audit findings, minimizing litigation, and streamlining the overall audit process," said Saurabh Agarwal, tax partner, EY.
The CBIC's emphasis on standardized interpretation underscores its commitment to fair business practices while ensuring robust GST compliance," added Agarwal.
However, majority of notices have been served for fraud ITC. To tackle the menace, the department has undertaken a special drive to weed out fake registrations.
So far, about 1.2 trillion tax evasion cases have been detected and as many as 59,000 entities identified for verification in order to ascertain whether they are fake.
Feature Presentation: Ashish Narsale/Rediff.com
