Arjun (Fictional Character): Krishna, India being a multi-cultural, multi-ethnic and multi-religious society, celebrates various types of holi, of various religions. Which are the types of holi that will be played between the tax department & taxpayers this year?
Krishna (Fictional Character): Arjuna, the festival of holi is celebrated with great enthusiasm all over India. It is known by different names and celebrated with varied traditions. In the same way, this year the tax department is also ready to play different types of holi with the taxpayers, of which the Income Tax department will be playing the Floral holi (Foolonki holi) and the GST department will be playing Latthmar Holi. Lets discuss about it in detail.
Arjun (Fictional Character): Krishna, What is the Floral holi that the Income tax department has planned to play with the taxpayers?
Krishna (Fictional Character): Arjuna, It is said that Lord Krishna used to play Holi with flowers of rose, marigold, and palash which are good for the skin, and is a symbol of joy and cheerfulness. Similarly, the Income tax department has introduced the “Vivad se Vishwas” scheme which shall prove good for the taxpayer’s pockets whose tax, interest & penalty demands are locked in disputes since long time.
The Income tax department has also offered ‘Thandai’ to the taxpayers by giving a benefit of reduced tax rates for the domestic companies and Individuals and HUF’s. The new Rate of Domestic Companies are changed from 22%, against 30% earlier. For new manufacturing companies the tax rate is, 15%, as against 25% earlier, for Individuals and HUF’s a new section 115BAC has been introduced to pay tax at a lower rate.
As holi celebrates the beginning of Spring, the taxpayers are also celebrating the New simplified return system and E-invoicing under GST which shall be applicable from 1st April 2020 i.e. beginning of the new Financial year.
Arjun (Fictional Character): Krishna, What is the Latthmar holi that the GST department has planned to play with the taxpayers?
Krishna (Fictional Character): Arjuna, Lathmar holi is a traditional type of holi, when women beat up men with sticks, and the men have to defend themselves. It is played as a playful ritual in Banaras. In the same way, the GST department, on being caught several cases of fraudulent claim input tax credit (ITC), has now decided to play “Latthmar holi” with the taxpayers. In Union Budget 2020 it has been proposed to take massive steps to curb issuance of fake invoice. If a false entry is found under the GST Act in any Survey, Search or Seizure etc., the GST department is ready with its sticks to beat such taxpayers using fake invoices, and levy heavy penalty under the both GST act. Not only this, GST Department will give its sticks further to Income Tax Department in such scenario. The Income tax department has added new section 271AAD which levies penalty on 100% amount of such fake invoice. Whereas, under the GST act, the penalty shall be equal to the tax amount only. One false entry would lead to entry into world of litigation.
Further, the other sticks that shall be used by the GST department are Notices u/s 16(4) for disallowance of ITC, under rule 36(4) for excess ITC claimed as reflected in electronic credit ledger and section 50 for interest on delayed payment of GST.
The taxpayer thus will have to be careful and defend himself.
Arjun (Fictional Character): Krishna, What should the taxpayer learn from this?
Krishna (Fictional Character): Arjuna, Holi is the festival where people meet and play holi together by forgetting their past disputes. In the same way the tax department is also taking steps to reduce disputes. Recently, due to corona virus, as large gatherings are reduced and people are avoiding face to face interactions. Similarly, the Tax departments have also adopted the same medium through E-Assessments and faceless scrutiny.