How does GST catch tax evaders?
How does GST catch tax evaders?
Do you remember the way your maths teacher taught you addition or subtraction, when you were quite young, going to class 1? GST regulators are using same tricks to catch GST evaders. I remember, my teacher scolding me when I couldn't answer rightly or cheated. And that was the only punishment that I got. But GST law has more severe penalties.
I don't know about you, and my learning addition story isn't that impressive as is of one of my friends Kunjbehari.
Kunjbehari comes from a village (or town, you may say), Pathakhera.
The only school that most of he and his friend villagers used to go to was 8 km away from their house.
Their teachers had their ways of teaching. Kunjbehari respects them a lot, in fact, worships them, because whatever he is today is because of them.
He told me this story. (paraphrased)
Teacher - Kunjbehari if Radhey gives you two apples, Lalita gives you three and Vishakha gives you four then how many apples do you have?
Kunjbehari used to add 2, 3 and 4 on his fingers and then give the answer.
(You can read the exciting part of the story at the bottom)
Now, let me compare this with how GSTN is using this in finding tax evaders.
You know it very well that GST law mainly runs through the internet.
Taxpayers submit all their information electronically, whether it is GST return, or e waybill or invoices or any other document.
Taxpayers submit their sales and purchases information on the GST return.
And didn't this make you think that if all of your buyers are reporting their purchases then just by adding them together GST department can determine your total sales?
And yes, this is what GST officers are doing now.
OK let me explain it through the same example.
Let me imagine your name to be Keshav and that you manufacture Ayurvedic medicines.
You might have many wholesale buyers. But let us assume Amar, Akbar, Anthony to be your only buyers.
You sold Rs20,000 medicine to Amar, Rs30,000 to Akbar and Rs40,000 to Anthony.
Amar, Akbar, Anthony submitted their GST return reporting correct purchases that they made from you.
The next step that GST officer does is that he adds the purchases that Amar, Akbar, and Anthony made from you and marks that you have sales of Rs90,000.
Then GST officer watches your GST return and looks for sales that you have reported. Let me assume that your accountant forgot to add the sales that you made to Amar in your return (Rs20,000). And reported a total sale of Rs70,000.
Of course, GST officer can see that you have reported sales fewer by Rs20,000.
And so, GST officer can call an explanation from you.
This is what happened in the 26th GST Council meeting.
The GSTN placed such discrepancies on the table of GST council. In fact, GSTN had put an extensive data analysis across the number of data available to them.
The discrepancies (variances) noted were surprising.
FM Shri Arun Jaitley has asked to ensure the correctness of data. He has asked them to take actions for tax evasion and non-compliances.
