The Goods and Services Tax (GST) Council, the federal indirect tax agency, has been urged to address the challenges faced by small enterprises and combat GST fraud. Amit Mitra, the principal chief advisor to West Bengal Chief Minister Mamata Banerjee, has written a letter to Union Finance Minister and GST Council Chairperson Nirmala Sitharaman, expressing worries.
In his letter, Mitra highlighted the overwhelming compliance burden that micro, small, and medium-sized businesses are facing due to the complexity of the regulations.
He expressed great concern over instances of GST-related fraud, including the discovery of over 20,800 non-existent organizations out of 69,000 GST identity numbers confirmed in the last two months.
Surprisingly, only 0.42% of the 1.4 crore GST-registered firms were verified, and this resulted in a staggering 30% of non-existent and fraudulent registrations. He expressed his worries saying that, imagine what inconceivable fraud would be found if all 1.4 crore GST-registered businesses were vetted, Mitra expressed.
Mitra emphasized that tax authorities usually select cases and prioritize verification based on risk parameters, red flags, and input from various stakeholders to achieve effective tax administration without hampering the ease of doing business.
He also criticized the current indirect tax system, describing it as “porous” and attributed GST-related tax evasion to deviations from the basic design framework of tax returns. Additionally, Mitra pointed out that the paperwork and circulars under GST are overwhelming for small enterprises.
While GST was initially designed to bring informal sector entrepreneurs into the formal economy through a simple and transparent system, the reality is that 90% of GST contributions come from large taxpayers who can navigate the complex regulations. Mitra urged the federal finance minister to convene a GST Council meeting solely focused on addressing tax-related fraud and meeting the compliance needs of micro, small, and medium-sized enterprises (MSMEs).
In summary, Amit Mitra’s letter highlights the need for the GST Council to consider the compliance burden on small businesses and tackle GST fraud effectively. His call for a dedicated GST Council meeting to address these issues reflects the growing concern over the impact of complex regulations on MSMEs and the need for a fair and efficient tax administration system.
