Introduction
In an effort to tackle fraudulent invoices and misuse of input tax credit (ITC), the authorities responsible for enforcing the Goods and Services Tax (GST) are pushing for immediate access to taxpayers’ banking transactions. This move aims to address the issue of fake invoices, which have led to the accumulation of undue tax credits being utilized for hawala transactions. Instances have been uncovered where the funds from these fraudulent activities find their way back to the individuals who initiated the fake invoices through intricate channels. Shell companies have also been identified as using fake invoices to route money. Tracking the flow of funds is crucial in such cases. However, obtaining timely banking transaction data poses a challenge as taxpayers may provide information for only one bank account during GST registration, while they might be utilizing multiple accounts.
The Need for Faster Access to Banking Transaction Data
By the time the relevant details become available, it is often too late, as the culprits behind the fraudulent invoices may have already vanished. Therefore, the GST authorities are now working towards gaining faster access to banking transaction data, similar to what the income tax authorities have. The income tax department receives data on high-value transactions, suspicious activities, and cash deposits exceeding a certain threshold to monitor potential tax evasion.
The Central Board of Indirect Taxes and Customs (CBIC) is taking up the matter to combat tax evasion, although further internal discussions and consultations with the Reserve Bank of India are required. Additionally, the GST authorities plan to expand the databases used in their risk assessment to identify potential tax evaders, particularly in service-related industries where verifying the actual delivery of services can be challenging.
Utilizing Databases for Risk Assessment
According to sources, the GST department is likely to access various databases, including provident fund data, customs data on shipping lines and freight forwarders, railways, and Panchayati Raj data on construction and works services. These databases will provide insights into the services provided by different companies, enabling authorities to determine if they are paying the appropriate taxes and availing input tax credit.
Furthermore, the GST authorities intend to cross-check taxpayer information using the income tax database and filings from the Ministry of Corporate Affairs. This increased emphasis on combating tax evasion coincides with the GST department’s ongoing efforts to curb fake invoicing and tax fraud.
Special Drive to Detect Suspicious GST Identification Numbers
From May 16 to July 15, central and state tax administrations are conducting a special all-India drive to identify suspicious and false GST identification numbers. With approximately 14 million registered businesses and professionals under GST, the government aims to expand the taxpayer base by bringing tax evaders into the fold.
Conclusion
The drive to gain access to banking transactions data marks a significant step in the fight against tax evasion and fake invoicing. By utilizing various databases and cross-checking taxpayer information, the GST authorities seek to ensure that businesses are paying the correct taxes and availing input tax credit legitimately. With a special drive underway to identify suspicious GST identification numbers, the government aims to widen the taxpayer base and foster a more transparent and compliant taxation system.
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