prpri Tax Evasion under GST and Measures to Curb It Tax Evasion under GST and Measures to Curb It

I. Introduction

Goods and Services Tax (GST) was implemented in the Indian economy from 1st July 2017 to replace the multiple indirect taxes and surcharges which were levied before 1st July 2017 with a single customized tax structure and also with the objectives of eliminating the cascading effects of taxation through the input tax credit mechanism and levying the tax only on the value-added. In the main objectives of GST’s implementation, one broader objective of combating tax evasion in indirect tax structure was also included. Tax evasion has become a major problem for the government of almost every country which is difficult to regulate.

GST has brought in a ‘one nation one tax’ system with multiple tax rates, but its effect on various industries is slightly different. The first level of differentiation will come in depending on whether the industry deals with manufacturing, distributing, and retailing or is providing a service.

One of the dream policy initiatives of the PM is the Make in India project that would enable India to become a manufacturing hub. The initiative is particularly important because of the sluggish domestic manufacturing sector and the need to attract foreign investment. If implemented well, it will create employment/job opportunities for the burgeoning jobless youth of the country.

To make India a manufacturing hub, foreign investors/companies must find it conducive to do business here. One of the major impediments to a smooth business, especially in the manufacturing sector, is the uncertain and unpredictable indirect tax regime.

II. Evasion of GST

Tax evasion is the illegal attempt through which the taxpayers try to reduce their tax liability but in tax avoidance taxpayers reduce their tax liability through the legal attempt. Tax evasion and tax avoidance both attempt to reduce the tax compliance of the taxpayers and also the revenue of the government. In the previous indirect tax regime, the administration of tax compliance of taxpayers was costly and also not easy because of a multiplicity of taxes that’s why GST was implemented to transform the Indian economy into “one nation and one tax and one market”. But the taxpayers also creating hurdles in the achievement of reducing tax evasion in indirect tax structure through exploiting the loopholes of the GST framework and making attempt to find improved and innovative ways to evade their tax liability. This research highlights the tax evasion strategies which the taxpayers are following after the GST’s implementation to reduce their tax liability in the GST regime. This research also cited the alleviating measures which the tax administration authorities can strategically and efficiently apply to combat the tax evasion in GST.

III. Tax Evasion in Various situations

3.1 Evasion through Separate Registration:

Taxpayers working as a single firm but showing the firm as two or more legal entities so that the turnover could be less than the registration threshold of Rs 20 lakhs and not required to pay tax. For eg; a taxpayer doing a business and the annual turnover is 38 lakhs which is greater than the registration threshold and taxpayer requires to get registered as a taxable business and also require to pay the collected tax on supply but instead of getting registered the business as a single firm the taxpayer may register the business at the name of two or more person, maybe at the name of his spouse, relatives or other person and showing the single firm as the two or more different firms to show the turnover of the firms below the registration threshold limit of Rs 20 lakhs and escape from the requirements of tax compliance under GST registration.

3.2 Evasion through Bills Manipulation :

Taxpayers are making the partial bills on the single supplied item by showing the two separate supplied items so that the sale price on a particular bill may be less than the limit at which lower tax rates are applicable to reduce their tax liability. E.g.; tax rate of 5% applicable on the cloth costing below Rs 1000 and 12% applicable on the cloth costing more than the Rs 1000 and instead of making a single bill for shirt and pant costing more than the Rs 1000 on which 12% tax rate is applicable, taxpayers are making two separate bills i.e. one for the shirt and one for pant and these two separate bills showing sale price less than Rs 1000 on which 5% tax rate is applicable and evading their tax liability

3.3 Evasion through Branded or Non-Branded Goods Trading:

Taxpayers are escaping from paying tax through selling the goods as unbranded goods and avoiding the selling of goods under a branded trademark because the tax rate on the branded goods is 5% and on unbranded goods is 0%. Taxpayers are evading their tax liability by exploiting the loopholes of different tax rates under the GST regime.

3.4 Evasion through Sales Under report:

Taxpayers are concealing their income through under-reporting of the sale so that either the taxable amount may be reduced or the annual turnover may be less than the registration threshold limit of Rs 20 lakhs. This type of tax evasions is mostly done at the retail level because at the initial level of value-chain the underreporting of sale is difficult due to the claim of input tax credit by the purchaser under the input tax credit mechanism. But at the retail level, under-reporting of sales can be easily done because final consumers don’t claim any input tax credit from the government and retailers are generally avoid issuing the sale invoice for concealing their exact sales amount.

3.5 Evasion through Fake or wrong invoices

Fake invoices have become a popular term in the last year; however, the actual meaning of this is unknown to many. Fake invoices mean the issuance of an invoice without any underlying supply of goods or services. Issuance of fake invoices (also known as Dabba invoices) is commonly seen for goods that are supplied to retail customers not claiming any tax credit.

To date tax authorities have zeroed in on fake invoices of cement, steel, high-value luxury bags and clothes, beauty products, papers, high-cost electronic items like I Phone, iPod, etc., and hospitality services including banqueting.

Earlier invoice-wise matching was proposed under the GST regime, however, due to technical challenges, this proposal was not implemented and thereby gave an entry to the tax evaders in the supply chain.

It is continuously found by the taxing authorities that registered persons are buying fake invoices through an agent, who is accountable for finding such suppliers and also ensuring smooth flow of cash in the chain. Fake invoices are a double whammy as it reduces GST collections and also has an immediate impact on direct tax collections.

Many of items where MRP is not possible to print come out from factory with lower invoice value and GST evade on all points from Manufacturer to Retailer.

3.6 Evasion through Construction expenses

Section 17 (5) of GST law states that; Input tax credit shall not be available in respect of the goods or services or both received by a taxable person for construction of an immovable property on his account including when such goods or services or both are used in the course or furtherance of business subject to the condition that such construction expenses are capitalized, to the said immovable property.

There is no monetary limit guiding the capitalization of an expense and it is left to the taxable person to decide the same in the light of applicable Accounting Standards. Now what has been done by the taxable persons is that they are not capitalizing the amounts in their books and are claiming the GST paid as Input Tax Credit.

In the erstwhile regime of VAT and Excise, both tax credit on account of any civil construction was not allowed and thereby it always formed part of the cost of the company. However, taxpayers are now using the technical loophole in the GST regime to claim additional tax credit which results in a colossal loss for the exchequer.

3.7 Evasion through E-Way bill

The concept of the E-way Bill was introduced by the Government to keep a check on Tax evasion and made applicable only on motorized vehicles. An E-way bill is an online generated document required by the person in charge (“PIC”) of the transportation for the movement of goods. As the E-way bill was applicable only on motorized vehicles the traders found a different way to evade GST. Some of them are now using Horse-carts, Bullock carts, or manual carts to transport goods across smaller distances.

Some of the traders who intend to work under the radar are now using railways to evade taxes. Unlike goods moving through road transport which is being stopped in midway, there are virtually no checks in the case of railways and making it easier for the supplier to supply goods on a rail network without using an E-way Bill. Chances of tax evasion on rail networks would be high till the time there is the seamless flow of data from servers of Indian Railways to GSTN.

E-way bills are generated when the goods costing more than Rs 50,000 are supplied in conveyance between the two or more states to detect the sale of supplier and goods entered in one state costing more than the Rs 50000. But the supplier is attempting to evade the tax and concealing the sale amount by supplying the goods costing more than Rs 50000 in two or more different slots on different days so that supply value may be less than Rs 50000 and not required to generate the E-way bill.

Round-tripping is a mechanism whereby a transporter uses the same set of documents multiple times for transportation of different consignments. Post-E-way bill introduction this modus operandi has been limited but is still not eliminated.

Let us take an example: Goods which are transported from Delhi to Noida distance of which is less than 100 Kms. E-way would have a validity of 1 day, which is sufficient for 3-4 round trips on the same vehicle.

Every round trip leads to tax evasion of full load picked up by the vehicle. Checking such round-tripping is a difficult task without the implementation of the PAN India Fast-tag system on all national and state highways.

3.8 Evasion through the Hospitality industry

Nowadays Hospitality industry generally gets its revenue through Online Travel Agents (OTAs) such as Booking.com, MakeMyTrip, Trip Advisor, etc. Guests book their accommodation through OTAs and pay an amount to OTAs directly and OTAs pay booking amount to Hotels after deducting their commission. Now what some Hotels are doing is that they book the revenue in their books of accounts on a net basis i.e. Gross booking amount less commission paid to OTA and pay GST on that net amount, instead of booking and paying tax on the gross amount.

The net effect of this transaction is that Government does not get GST to the extent of commission paid to the OTAs, which in several cases would be as high as 25% of the top line. Many times this reduction of OTA commission also results in lowering of tax brackets.
For ex: If the applicable tariff of a hotel room booked through OTA is INR 7,600/- and 20% of the booking amount is charged by OTA as a commission. Then the total amount of revenue booked by the hotel is INR 6,080/- (i.e. INR 7600-1520 being commission amount of OTA) and the rate charged is 18%. Which principally should have been 28% due to tariff falling in the slab of INR 7,500/- and above.

3.9 Evasion through Personnel and Business Expenditure:

Some taxpayers are making the claim of personal expenses or the bogus expenses as business expenses and getting the excess input tax credit on these bogus expenses. This type of tax evasion is also possible when the tax administrators promptly issue the GST refunds to achieve neutrality and efficiency in the tax structure.

3.10 Evasion through GST liability calculation:

After the GST implementation, all the accounting and taxation system has changed and in taxpayers, there is lack of knowledge about which tax rate will be applicable, which item is taxable or which is exempt, how to calculate the GST liability, how much amount of input tax credit to be claimed and on which item input tax credit is available. Some taxpayers are inadvertently doing mistakes in the calculation of GST liability but some taxpayers are advertently making errors in the calculation of GST liability and claiming the excess input tax credit and evading their tax liability and in case of detection of tax evasion the taxpayers are showing that the mistakes are committed inadvertently.

3.11 Evasion through No adequate record-keeping:

Some taxpayers don’t maintain the proper accounting records of their business transactions especially when the business is done at the smaller level, lack of knowledge of accounting record maintenance, or because of the costly affairs of record maintenance and hiring of accounting professionals. Due to the non-maintenance of accounting records, taxpayers advertently make delays or commit errors in return filing or make electronic manipulations in their accounting records so that no proof can find out and they can easily evade their tax liability.

3.12 Evasion through Tax Rates wrongly charged

Frequent changes and multiple rates have become an easy way to evade tax in the GST regime. There are many entries in the Tax rate schedule where the rate of tax depends on the price of a commodity like in the case of clothing, footwear, etc. In these industries, retailers are artificially bisecting the invoice value into two or more components to claim tax advantages.

For Ex. One suit that costs more than INR 1,200/- is liable to a 12% rate of GST. However, if that suit is broken into two parts (Coat and trousers) of INR 600 each then the tax rate is only 5%. This mechanism of splitting the invoice value often results in a loss for the tax authorities.

In other cases of solar power projects, tax avoidance is seen by tax authorities. Solar power generating systems (SPGS) are taxed at the rate of 5% and other supplies are to be taxed at the rate of 18%, but technically law does not define SPGS.

Thereby such companies have entered into two separate contracts artificially splitting the value of a contract between SPGS and services on installation. They pay tax @ 5% on the Equipment part and the remaining value is taxed @18%. Two rulings of the Maharashtra Authority of Advance Ruling have stated that such artificial division of a single contract is against the GST regime and the entire contract needs to be taxed @18%.

This mechanism of tax avoidance is very difficult to identify and track in real-time due to its non-conspicuous nature, even though it could be pegged as one of the most polished forms of tax lowering.

3.13 Evasion through Compensation from Employee for Early Notice Pay

Generally, companies have an agreement with their employees regarding the notice period to be served in the event of their exit from the organization. However, there is always a clause that outgoing employees may leave the organization early after paying a certain amount called Notice Pay. Department is of the view that GST is applicable on such Notice pay recoveries, and thereby they have issued notices to several MNC companies on this point.

Corporate are of the view that there is no underlying principle of supply in this case and thereby no GST is applicable. We will see the fate of this litigation once the matter reaches higher courts in India.

3.14 Evasion through ITC Claim

A report tabled by India’s Comptroller and Auditor General (CAG) before Parliament admonished the government for being slow in implementing technology and simplified filing process for Goods and Services Tax (GST) as it said detecting evasion has improved.

Report No 1 of 2021 on “Indirect Taxes – Goods and Services Tax, Central Excise and Service Tax” said the number of cases detected via anti-evasion activities had improved 72% between FY18 and FY19 from Rs 38,686 crore to Rs 66,507 crore; and 49% between Financial Year (FY) 2016-2017 and FY2017-2018.

“The Ministry attributed the significant increase in the number and amount of cases detected through anti-evasion activities to increase in the tax base owing to GST implementation; issuance of fake invoices for passing on a substantial amount of Input Tax credit by unscrupulous taxpayers; and setting up of Directorate General of Analytics and Risk Management (DGARM), which is entrusted with the functions of analyzing big data, the outcomes of which were intermittently shared with the DGGI,” said the report.

3.15 Evasion through Technology

Several things: Failure of technology to act as a deterrent against evasion, initial lack of oversight and supervision, and non-existent tax return forms that would have helped in matching invoices and weeding out any fake transactions.

Tax evasion has been rampant since the GST rollout, with various instances coming to light of taxpayers using ingenious methods to evade the indirect tax. Taxmen have uncovered many modus operandi and are aggressively using technology and existing data — from e-way bills and GST returns — to check evasion.

3.16 Evasion through Cash Transaction

In different states, service providers with Turnover of up to 10 Lakh OR 20 Lakh are exempted from GST. Professionals providing private services like medical, legal, accounting take advantage of this. They mainly deal in cash and conveniently show returns below this amount. Some even go to the lengths of opening multiple subsidiary firms to avoid the tax grip.

3.17 Evasion through Billed versus unbilled revenue:

Several smaller entities including pharmacies and grocery chains do not prepare bills for transactions. Only those who insist on them are given bills. This can be used to hide revenue earned as long as the cash is not deposited in bank accounts.

3.18 Evasion through Missing trader’s frauds:

These types of frauds are common in other countries like New Zealand, Australia, etc. in which taxpayers purchase the tax-free or tax exempted goods and collect the GST on the sale of goods and services, and after some time, they close down their business operations and go underground with the collected amount of GST. This type of fraud is one-time fraud. Sometimes taxpayers get registered themselves only to make a claim of a big amount of input tax credit for the goods which are not delivered at all and after getting the input tax credit with the help of fraudulent documents and invoices they go underground with the amount of input tax credit.

3.19 Evasion through Frequent changes in tax policies

Tax policies in India are changed frequently by the government. It creates confusion among taxpayers and officials about the relevant provisions Complex tax laws and loopholes to avoid tax in-laws: Indian tax law is complex. In the same law, people find provisions to escape from tax liability.

3.20. Evasion through Failure to curb bribery:

There should be an adequate system to curb bribery and corruption among officials. They help taxpayers to avoid tax by taking an agreed share of profit out of evaded tax

3.21 Evasion through No Equality of GST

On the same service for one professional GST applicable and other, it will not. This is the reason increase in tax evasion cases. Example Service is related to Tax Advocate and Chartered Accountant Services. Return filing, Tax Consultancy, Cases with department and other same services by Chartered accountant is taxable but not for Tax advocate.

The medical profession is considered a SEVA profession and exempted from GST provisions. But sad to say that during the Covid Pandemic the medical profession has charged consultancy fees and hospitalization charges unscrupulously and thereby taking advantage of the tax exemptions provided to their field. To control such practices, which adversely affect the lower middle class and an underprivileged class of Indian citizens, the government should bring in a threshold limit on which the GST exemption is provided to the Medical profession.

4. Measures to Alleviate the Tax Evasion under GST Regime

To combat the tax evasion in the GST regime and to promote voluntary GST compliance by the taxpayers, the tax administrators may follow the various alleviating measures which are described below:

4.1 Promote the GST education in taxpayers:

The tax administrators should organize the educational and communication programs regarding the GST framework and its benefits, benefits of voluntary compliance by taxpayers, how the GST liability is calculated, what tax rates are applied on particular goods and services, time-period of return filing, the penalty in case of tax evasion, etc. so that the taxpayers are motivated to voluntarily comply with GST and chances to evade the tax may reduce and taxpayers have no option to advertently evade the tax.

4.2 Educate the customers about demanding invoices:

Tax administrators should educate the customers about the benefits of demanding invoices from the seller at the time of purchase. Customers should be fully aware of the fact that if they don’t demand the invoice from the seller to save the tax then the seller may exploit them by charging the price at their wish and if customers don’t demand the invoices then the seller may evade the tax through concealing of the wholesale amount because the seller doesn’t record the sale in the books of accounts for which the invoices had not issued and sellers may easily evade the tax on the sale for which no formal documents or invoices had issued.

For the promotion of Invoices taking, Government should facilitate to end consumers through Lucky draw scheme, facility in Income Tax deduction, facility in Money Back, facility in the discount in next purchase, etc.

4.3 Designing of the user-friendly online portal:

Government should do the efforts in designing such type of online integrated computerized portal in which if customers demand the invoices for the sale then the seller issue the invoice through an electronic portal which should be directly linked to the tax administration official portal, so that the tax administrators may get the information about the exact sale and the taxpayers have no any chance to evade the tax or conceal the sale amount.

4.4 Collection of Major GST at One Point

In India Business model follows Manufacturer-Distributor-Dealer-Retailer then Consumer. There are two types of Product sales one on which PRE MRP mentioned and NO MRP mentioned on the product. In the case of PRE MRP mentioned products already include GST and Retailer cannot sell Product higher than the MRP. In this type of Product following measure maybe take up:

1. Unique Bar Coding Compulsory on each Item.

2. E-Invoicing compulsory for all manufacturers without any threshold limit.

3. GST on MRP will be paid by The Manufacturer.

4. ITC claim will be claimed only by the Manufacturer.

5. Other channels will require to pay Minimum GST under composition for cross-matching.

6. This will help to Government to reduce the Tax Rate, Tax evasion, Minimum Controlling, Ease to do Business, and Reduce MRP.

The second type of products in Which MRP has not mentioned play a major role in GST Evasion. Many items are sent from Factory under billing and unable to verify and calculate actual value at the Checkpoint.

In this type of Product following measures may be taken up:

1. E-Invoicing compulsory for all manufacturers without any threshold limit.

2. Every Manufacturer Should prepare MRP/Invoice List of Product

3. GST will be paid by The Manufacturer.

4. ITC claim will be available only to Manufacturer

5. Other channels will require paying Minimum GST under composition for cross-matching.

6. Quantitative detail should be compulsorily maintained by Manufacturer as well as the other Channel.

7. This will help to Government to reduce the Tax Rate, Tax evasion, Minimum Controlling, Ease of Business and Reduce MRP.

Another category of the second type of products where MRP not mentioned and rates vary on daily basis:

1. E-Invoicing compulsory for all manufacturers without any threshold limit.

2. Government should declare MRP of these types of products like Gold, Silver, and Bullion, etc.

3. GST will be paid by The Manufacturer.

4. ITC claim will be available only to Manufacturer

5. Other channels will require paying Minimum GST under composition for cross-matching.

6. Quantitative detail should be compulsorily maintained by Manufacturer as well as the other Channel.

7. This will help to Government to reduce the Tax Rate, Tax evasion, Minimum Controlling, Ease to do Business, and Reduce MRP.

4.5 ITC Claim:

Presently facility of ITC claim is too much complicated, Section 16 and 17 says if Assessee completes the relevant conditions ITC allowed to them but now the new policy of ITC taking, it is compulsory to show ITC in form 2A and 2B, if it is not showing, informs it will not be allowed. In the future, this will create litigation between the department and Assessee because without taking action on the Supplier, the receiver bears the double tax payment due to the mistake of the supplier.

This situation always creates litigation. It is good to collect GST at one point instead of different points and allowed ITC at one point instead of different points.

4.6. Remove the different rates on a single service:

Government should design the same tax rates slab on particular goods and services and remove the different price limits on which different tax rates are applied in case of one particular item so that taxpayers may not exploit the loopholes of the GST framework.

4.7 Make industrial relation with the third party:

Government should make the cordial industrial relation with the third party such as industry representatives, tax practitioners or tax agents, etc. to increase the use of external information to identify the targeted evading taxpayers’ population or to develop a better understanding of change in behavior of taxpayers after the implementation of GST.

4.8 Develop the use of cash-less transactions:

Most economists believe that the chances of tax evasion are higher in those economies where the use of cash transactions is most prevalent. In a cash economy, taxpayers may easily do business transactions in a hidden way to save the tax or evade their tax liability. Therefore government should increase the use of cashless or electronic payment transactions in the economy. To increase the use of cashless transactions in the economy government should reduce the supply of money in the economy, organize the educational program to increase the awareness and digital knowledge in people, and provide full security in the use of digital transactions. If the use of cashless transactions increased in the economy then the details of online business transactions can be easily available through the online payment portal and taxpayers will not have an option to evade tax and they have to provide the details of their business transactions in their tax returns and because of this, chances of tax evasion will be reduced.

The Indian government took the initiative to increase the use of cashless transactions in the economy on 8 November 2016 through the move of demonetization of Indian currency of denomination of Rs 500 and Rs 1000 notes which was approximately 86% of total currency but the aim of transforming the Indian economy in the cashless economy could not fully be achieved because the 96% of demonetized currency came back in the economy in form of cash currency after the one year of demonetization move and customers mostly use the cash currency because of convenience in payment, insecurity in digital transactions or to save the tax on the purchase. Due to the use of cash currency in most of the transactions, suppliers exploit the customers and don’t record the exact amount of sales to conceal the income and evade their tax liability.

4.9 Use of systematic process for GST registration:

Tax administrators should use the systematic and specialized process and internal as well as the external data to identify those businesses that should be registered but are not registered or properly check those businesses on which separate registration are taken to show the annual turnover below the registration threshold limit.

4.10 Simplifying the taxation rules and compliance burden on taxpayers:

Generally, taxpayers evade their tax liability when the compliance burden is higher or if the taxpayers believe that government is not fully utilizing the tax amount for the benefits of the people or any perception prevails regarding the fact that the government is exploiting the taxpayers and putting the unnecessary burden on their business then the chances of tax evasion will be higher. Therefore, tax administrators should design the simple GST framework and simplifying its rules and regulations to easily and efficiently administer the tax compliance of taxpayers in GST and reduce the compliance burden on the taxpayers and provide incentives to motivate the taxpayers to voluntarily comply with GST.

4.11 Sufficient training the taxation staff to administer the tax compliance:

Government should provide the proper training to the taxation staff to properly understand the GST framework, its legislation, and also the loopholes of the GST framework which can be exploited by the taxpayers to evade their tax liability so that they can efficiently administer the tax compliance of the taxpayers in GST regime and also targeting the tax evaders and judge the change in compliance behavior of taxpayers after the GST implementation.

 The staff needs to be clear on the rules of tax evasion and know what they must do to comply, including watching out for red flags, conducting due diligence checks, and raising any concerns promptly. They must be able to demonstrate when the training was delivered, what was the content, whether the employees concerned understood the violations of the law, and whether they made an attestation. For all these reasons, companies often do this training as e-learning – often choosing a provider like Skill cast.

4.12 Comparison of GST revenue and GDP consumption growth rate:

Tax administrators should compare the actual GST revenue realized and the growth in GDP consumption rate subject to GST. If both the figures are correlated and approximately equal then there is no non-compliance or tax evasion by the taxpayers but if there is a big gap between both figures then there is a chance of tax evasion and tax administrators should do efforts to recognize the roots of the gap in GST revenue. To identifying the GST gap in revenue and targeted evading taxpayers, tax administrators should use internal as well as external data and make a cordial relation with the third party of the industry.

4.13 Use of GST filing and GST payment index:

The tax administrators should use the GST filing and GST payment index over the year to identify the gap in GST compliance. The GST filing index is the ratio of late filing return to the total tax return filing which helps in identifying the tax noncompliance of return filing. The GST payment index is the ratio of non-payment of GST to the total of GST payment which helps

4.14 Know who poses a high risk of tax evasion in your company:

Entities with complex tax planning structures, difficulties establishing beneficial owners, customers with unsubstantiated sources of funds or wealth, and also companies based offshore in jurisdictions with high levels of secrecy all pose a higher risk. Tax advisory, legal and financial service firms are also considered high risk, as well as companies offering private wealth management.

But every company runs the risk of aiding tax evasion, eg in the way you pay your suppliers, your consultants, and your facilities management company, and in the way you help your clients.

4.15 Conduct third-party due diligence

This is especially important for third parties and customers, to ensure you are not conducting business with anyone who may be involved in tax evasion. This should be proportionate to the level of risk faced. In short, the higher the level of risk, the more information or due diligence is required.

Develop criteria, monitoring, and screening processes to check customer tax compliance status.

Remember that tax evasion doesn’t just apply to companies or customers with links to offshore tax havens

4.16 Loopholes plugging

In the majority of the cases, tax evasion is due to errors in the drafting of GST law and loopholes plugging in. Law in its nascent stage and needs to be repaired by way of amendments, notifications, and clarifications. Further Government should consider rationalizing the “multiple GST rates applying on a single product” into a single rate so that tax avoidances through breaking up of the invoices is not possible.

We also believe that a comprehensive IT network wherein there is a free flow of data across all national data centers including GSTN, Eway bill, licensing, Fast-tag, local registrar, CPC-direct taxes, Aadhaar, Passport may go a long way in creating and building a tax evasion free environment.

5. Cover New Services in GST

In the Present Scenario GST exempted Many services, which are not right to exempt. These Services Should be cover in GST. As per GST norms Threshold limit provided to small taxpayers, it should apply to all services provider including exempted services. Following Services should be considered for GST applicability:

GST should be introduced on TAX advocates as they provide the same services as Other Service Providers like Chartered Accountants.
GST should be introduced on Private Medical practitioners over the threshold limit at a minimum GST rate.

GST should be introduced on School and Colleges other than on Tution fees charges from students by them (Like Management fees, sports fees, Function fees, Journal fees, etc.) because GST on affiliation fees applicable on the same basis.

GST should be introduced on Legal Advocates providing services in court. There are many types of cases in court: CIVIL AND CRIMINAL. Cases fight in the High court and Supreme Court, it is simple to know how much advocates charge the fees from their clients. Fees for Cases fight in the High court and Supreme Court should be cover under the GST mechanism.

GST should be introduced on Hospitals providing high-class facilities as well as higher room rents and different charges (PPE KIT, Visiting Charges, and Consultancy, etc) from patients in name of treatment should be cover in GST.

6. SUGGESTION SUMMARY

  •  Reducing tax Rates
  •  Make more simplified laws and simplified system
  •  Design a well-organized tax administration structure.
  •  Strengthen anti-corruption policies
  •  Increase awareness among taxpayers by conducting seminars, conferences, and media.
  •  Design a permanent tax structure.
  •  Ensure the political changes do not affect well-defined tax structure, Make tax administration more independent and autonomous without
  • Losing final control of Government.
  •  Audit, tax collection, depositing, and filing provisions to be more strengthened and updated.
  •  Make penalty provisions stronger and avoid their non-implementation.
  •  Encourage taxpayers to pay tax by more friendly schemes.
  •  Give relief provisions to huge taxpayers.

IV. Conclusion

In the Indian economy, GST was implemented with the objectives of replacing the multiple indirect tax structure with the customized single tax structure, eliminating the cascading effect of taxation and the tax borne by the only final consumer through input tax credit mechanism and levying the tax only on the value-added.

Many tax evasion strategies may be followed by the taxpayers to evade the tax liability under the GST regime and also the tax evasion alleviating measures to combat the tax evasion under GST is not addressed by this article which remains a topic for further research.

References:

Note: This article is prepared from my research under same name which is already published in Journal: (IJRAR) IJRAR Journal No. 43602, IJRAR 235101,PAPER ID:IJRAR21B2118

Author Bio

Qualification: CA in Practice
Company: C A K P K AND ASSOCIATES
Location: JABALPUR, Madhya Pradesh, India
Member Since: 28 Feb 2018 | Total Posts: 5

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