Goods and Services Tax (GST) database management system might be used by the Indian government to track the records of income tax filings or tax evaders. The Indian government is trying to set-up a mechanism where data acquired from GST Network would be interconnected with the income tax filings.
Tax officials said that, right now, the GST Network portal is at the development stage, the government seeks to develop a database in which the income of the companies, as well as their promoters, would be matched with the tax returns filed. Yet there is a confusion that the government will use this data to find out the tax evasion in the previous years or for the prospective tax scrutiny.
Likewise in the previous tax regime, GST remarks a backlog and it’s difficult to underreport the annual income of the business or show increased expenses. Industry trackers said tax officers that they don’t have a need to work on data analytics, with the help of GST Network they acquire the data easily.
Jaskiran Bhatia, partner, tax technology and analytics, Deloitte India, said, “Technically, it is possible to use GST data to draw linkage with the income-tax data through the common data set with the help of analytics. Currently, the GSTN and tax department already have the data to carry out the risk analysis where outliers in terms of the industry average of tax payments are scrutinized and those not paying or under-reporting company revenues could be questioned.”
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To clarify the concept, here we are taking the example of a pharmaceutical industry which comes under manufacturing unit. The annual turnover of the company is nearly Rs 30 crores whereas they are paying corporate tax on Rs 4 crores. Apart from this, the promoters of the company may be under-reporting their annual income and running away from income- tax.
According to the tax experts, “Such maneuverings are now tough.” By adding that, “Earlier, there was no record of raw materials purchased and goods supplied; now, that cannot be manipulated, resulting in a sudden surge in the company’s revenues. Also, there are other tricks promoters used to show that their income is much below the highest I-T band”.
“It is imperative that the GST return is tied with the financials submitted to the income-tax office. Any discrepancy would be questioned by the income-tax office and the taxpayers would be required to explain the deviations,” said Amit Maheshwari, partner, Ashok Maheshwary & Associates.
Tax experts say that a sudden growth in an annual income of the company’s turnover could raise red flags due to the implementation of GST. Maheshwari said that “If the GST return shows a big jump in turnover of the taxpayer (due to increasing formalization of the economy, which is definitely a possibility in several cases) compared to the previous years, this could lead to tax officers questioning the past year’s returns as well”.
Data analysis has been done by the government to identify the records of income- tax filings and set to go after Benami properties. Raids all over the country have been started by the tax department, this has started with the largest income- tax evaders, those who had created and owned Benami properties.
The tax department is evaluating data of the taxpayers which includes phone numbers, credit cards, PAN details, tax returns and also social media platforms. It is quite difficult to look at several structured and unstructured data sources and understand it, whereas the big data analysis tools are being used by the tax department. The tax department can also get knowledge from technology experts, to evaluate data of the income tax filings or tax evaders.
