GST Evasion: Government expecting ₹50,000 crore mop-up on recovery of dues, multiple notices sent
Oct 25, 2023
The Indian government is expected to recover ₹50,000 crore in evaded Goods and Services Tax (GST) in FY24, Business Standard reported. This amount is over double that of what was recovered in FY23 and is likely to potentially be the highest annual tax collection, it added.
In FY24, GST officials have so far identified evasions amounting to ₹1.36 lakh crore; and have already recovered ₹14,108 crore of this. In FY23, an evasion of ₹1.01 trillion was detected, resulting in a recovery of ₹21,000 crore.
A substantial portion of this recovery is expected to come from incorrect claims of input tax credit by insurance companies, GST payments on expatriate services under the reverse charge mechanism, illicit clearances of tobacco products, and property transactions, the report added.
Tax Demands
The GST Departments have over the past few months sent a flurry of notices to companies to comply with tax demands. These include taxes on salaries of MNC's expatriate employees, taxes on online gaming, crypto tax and the expanded scope for Online Information Database Access and Retrieval (OIDAR) service providers.
Among those who received such notices include gaming company Delta Corp. On September 25, it received a notice for a tax shortfall of ₹11,140 crore, whereas, its subsidiaries were issued notices for an amount totalling ₹5,682 crore. The alleged shortfall in the payment of tax pertained to the period between July 2017 and March 2022.
As per the demand, notices were sent by the the Directorate General of GST Intelligence, Hyderabad; dues are follows - Delta Corp: close to ₹11,140 crore; subsidiary Highstreet Cruises and Entertainment: near ₹3,290 crore; and subsidiary Delta Pleasure Cruise Company: about ₹1,766 crore.
On October 23, the Bombay HC provided some relief by directing officials to hold off on final actions till its hearing in the matter is complete.
Earlier on October 18, around 1,000 subsidiaries of multinational corporations (MNCs) operating in India received tax demands pertaining to an 18 percent tax on salaries and allowances paid to foreign expats by the parent companies.
The demands, ranging from ₹1 crore to ₹150 crore, cover the period between FY18 and FY22 for payments by foreign parent companies to expats working in Indian subsidiaries of MNCs. Companies have been given a 30-day window to respond to these tax demands.
On October 16, notices were sent to around 70 digital companies including advertising firms, edtech and online gaming firms in line with requirements for 18 percent Integrated GST (IGST). The new tax is effective as of October 1, irrespective of whether the services are for personal or business use.
Previously, only business-to-business services were subject to IGST, and there was no tax obligation for individuals and government entities acquiring non-business services from overseas Online Information Database Access and Retrieval (OIDAR) service providers outside of Indian jurisdiction. These rules have changed.
Major players are not exempt. On October 16, FMCG giant Dabur has received a GST demand notice of ₹320.6 crore, from the Gurugram Zonal Unit of the Directorate General of GST Intelligence (DGGI).
Detection of Evasion
The detection of fraudulent activities and the ensuing recovery efforts in FY24 are largely attributed to various compliance measures and amendments made to the GST system, particularly in emerging sectors, the BS report added.
Furthermore, the GST authorities foresee a significant recovery from blocked tax credits, specifically in cases related to the construction of immovable properties. The Supreme Court has concluded the case and reserved its decision.
As per official data, the total tax evasion between July 2017 and February 2023 amounts to nearly ₹3.08 trillion, with recoveries exceeding ₹1.03 trillion. During the five and a half years leading up to February 2023, the GST authorities arrested 1,402 individuals for tax evasion, as per the report.
Between April 2020 and September 2023, over 6,000 fraudulent cases involving input tax credits, with a total value of more than ₹57,000 crore, were uncovered, resulting in the arrest of 500 individuals.
In the fiscal year 2022-23, 14,000 cases of evasion were detected, an increase from 12,574 cases in 2021-22 and 12,596 cases in 2020-21. This represents a significant effort to combat tax evasion and bolster tax recovery, it added.
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