Initiatives Towards Controlling GST Frauds

Mandatory in-person physical verification of business establishments has been introduced by the government whose main objective was to get in registration of GST. In the Indian Economy, Goods and Services Tax (GST) was implemented from 1st July 2017. The main purpose was multiple indirect taxes to be replaced and additional charges which were imposed before 1st July 2017 with an uni-customized tax structure. This also included the goals of removing the pouring effects of taxation through the mechanism of input tax credit and only the tax on value-added was removed. Frauds however can be defined as a planned act by an individual or a group of people who are demanded with governance (who are in authority)or sometimes involving third parties. This also involves the use of trickery to acquire a false advantage. Misstatement of information or misappropriation of the assets of the entity can be taken away by the fraud. For such fraudsters, GST is not an escape.

Areas where GST Frauds arise in a Major way

There are two major areas where these frauds can evolve. They are- 

• Tax credit of input and accounts
• Repays or Refunds

1. Tax Credit of input and accounts– We have seen a large number of GST fraud cases in the last three and half years. This was mainly around the use of false accounts or statements for invalid benefitting of Tax credit of input  (ITC). To pay GST on outward supplies, this ITC is further used. And also for declaring refunds or repays. For increasing the turnover of the supplier, hence this works as a tool sometimes. 

Under the GST authorities, the misused system of invoices could be- the supply of goods and services without the declaration of statements, exterior companies where the fraudster could route multiple accounts through some sources, zero-rated supply category is being utilized where some taxpayers might find some loopholes who tried to sold goods without issuing statements, etc.

2. Repays or Refunds– The unused amount available in the electronic credit register and cash register after payment of taxes and other payments can be claimed as a refund in GST.

Tax Evasion of GST

The illegal trial through which the taxpayers try to decrease their tax liability is termed as tax evasion. Taxpayers reduce their tax liability through the legal attempt in avoidance of tax.  To reduce the tax compliance of the taxpayers and revenue of the government, both the tax evasion and tax avoidance are similar in functions.

The various situations in which tax evasion can be observed are-

• Evasion of tax through separate registration- The taxpayers who are working as a single compression but show the firm as two or more legal organizations so that its turnover could be less.
• Evasion of taxes through manipulation of bills-Taxpayers may show the sale price on a particular bill may be less than the limit at which application flower tax rates are possible that will reduce their tax liability.
• Evasion of tax through branded or non-branded trading of goods
• Evasion of taxes  through  report through sales
• Evasion of tax through false or wrong invoices

Initiatives towards Controlling of GST Frauds

The various measures taken towards the Controlling of GST Frauds are as follows-

If an applicant chooses for authentication of Aadhaar, he needs to undergo biometric based Aadhaar authentication. As notified by the commissioner this will be authenticated at one of the centres of facilitation.

The Central Board of Indirect taxes and customs have separately induced a new rule. This follows as businesses with monthly turnover of over Rs 50 lakh to be paid at least 1 percent of their liability of GST in cash as mandated by the Board. This is achieved in order for their entire liability to be discharged. 

E-way bills have been tweaked for validity. The distance to be covered for each day of validity is being doubled and is effective till 1st of January. For transporting goods under GST e-way bills allow to cover 100 km per day. Now this coverage has increased to 200 km.

Conclusion

Hence a one nation one tax system has been brought up by GST along with multiple tax rates. However it’s effect on various industries is different. Differentiation will arise depending on whether an industry will deal with manufacturing,  distribution or is providing service.