Less than nine months into the GST regime, revenue authorities have detected rampant tax evasion through black market and under-valuing of imports.
Big data analytics by the authorities has revealed that although importers are paying the goods and services tax (GST), they are supplying the goods without bill, sources said.
Importers typically pay integrated goods and services tax (IGST) on goods they bring into the country. This tax is supposed to be set-off against the actual GST paid by the final consumer, or claimed as refund.
According to the results of the analysis, importers including bigger companies are paying IGST on imports but not claiming credit for the same.
This essentially means that the supply of imported goods to domestic channels is being done without a bill, the sources said.
A similar situation has been witnessed on cess charged on luxury and sin goods with companies paying it at the time of imports but not claiming credit or setting it off from final GST paid by consumers.
The GST council, the top decision-making body of the new indirect tax regime, had discussed the tax evasion at its meeting on Saturday. Sources said it has directed further analysis of the data to zero-in on the chain leading to evasions and initiation of adequate action thereof.
With monthly revenues under GST going down, preliminary data analysis showed that over 73,000 taxpayers are paying IGST of nearly Rs 30,000 crore but are not claiming refund for the same.
Data of IGST and cess paid on import of goods at customs port show that over 33,000 taxpayers have claimed over Rs 10,000 crore in excess of payment.
Sources said the department is using risk based parameters identify potential evaders, with eye on proprietor and partnership firms.
Rolled out from July 1, 2017, GST has subsumed over a dozen local taxes including excise, service tax and the value-added tax (VAT).
As per the data with revenue authorities, Rs 16,965 crore worth IGST refund claims have been filed with customs systems for the July-January period. About Rs 4,815 crore has been sanctioned as refunds, out of the Rs 9,760 crore worth eligible claims.
AMRG & Associates partner Rajat Mohan said beginning of data analytics mean that the government will soon begin to identify taxevaders. “I feel authorities could unearth rampant tax evasion by importers of luxury products or mobile phones wherein goods could have been imported at considerably low values and post-import such products are sold in black market without payment of taxes. The government coping with low collections, would use the data analytics to attack taxevaders,” Mohan said.
As per a finance ministry reply to the Lok Sabha, GST mop up was Rs 93,590 crore in July, Rs 93,029 crore in August, Rs 95,132 crore in September and Rs 85,931 crore in October.
The collections in November stood at Rs 83,716 crore, December (Rs 88,929 crore) and January (Rs 88,047 crore).
Meanwhile, Transunion Cibil and Sidbi in a report on Monday said that even as the economy has largely recovered from the shocks of demonetisation and GST implementation, micro enterprises with borrowings of under Rs 10 lakh are yet to fully recover.
“Micro, small and medium enterprises (MSMEs) with exposures from Rs 10 lakh to Rs 10 crore have recovered to pre-demonetisation levels, (but) the segment with exposure of less than Rs 10 lakh has still not recovered to that extent,” the report said.
It can be noted that the uptick in growth, wherein the GDP expansion accelerated to a 7.2 per cent, had led many watchers to say that the worries of the twin reform measures are behind the economy.
The report reiterated that the situation has improved in all segments except those with borrowings less than Rs 50 lakh, where the systemic exposure has not caught up with pre-demonetisation levels.
Further, the overall exposure of the formal financial system to the MSME sector was at Rs 11.75 lakh crore of the total credit outstanding of almost Rs 100 lakh crore. Only 5 million of the over 50 million MSMEs have accessed formal finance system for credit.
The note ban and GST, have however, upped the ‘formalisation’ of the economy which is seen in an increase in ‘new to credit’ MSMEs at 4 lakh units in the second half of 2017, as against over 2.7 lakh in the year-ago period.
On the critical factor of non-performing assets, the report said impaired assets in MSMEs have been “rangebound”, but the proportion of stress increases with the quantum of exposure, which means NPAs among smaller enterprises are lower as compared to the bigger ones.