The Income Tax Department in India is thinking about using information from the Goods and Services Tax (GST) system. This could help them find more people who should be paying taxes and encourage everyone to follow the tax rules better.
The GST system collects detailed information at every phase of business activities, including production, transport of goods, and real-time reporting of transactions. This data is used by the GST department to determine cases where income is not evaluated or underreported. This motivates individuals and businesses not get involved with such sort of unfair activities.
Also Read: How Income Tax Software Companies Should Prepare for Act 2025
This decision comes with a significant cut in the tax rate for people this financial year, which has led to a continued growth in the country’s income tax revenue. Officials specified that effective usage of technology and available data can support the government in enhancing revenue without making any revisions to tax rates.
Till now, the GST system has assisted tax authorities in tracking bogus invoicing and bringing various information businesses into the formal economy, which makes it a perfect source of financial data.
The income tax department can use its nudge strategy to focus on voluntary compliance. The department, rather than opting for stringent measure can now send reminders or notices to taxpayers, notifying them about the discrepancies or underreported income discovered in their returns. Such communications shall suggest that taxpayers submit a revised or updated return to rectify their errors and prevent other litigation.
According to the officials the efficient information accumulation and targeted communication with taxpayers improve revenue. The department with the same decision has the motive to make tax administration perfect while motivating honest and clear tax reporting.
