In the current fiscal year, officials have informed that the Central government anticipates a recovery of over Rs 50,000 crore in evaded Goods and Services Tax (GST). This figure is more than double the recovery achieved in the previous fiscal year, FY23, potentially making it the highest annual tax recovery ever.
As of now, during FY24, the GST authorities have identified Rs 1.36 trillion in tax evasion, with Rs 14,108 crore already successfully recovered. In the previous fiscal year, 2022-23, tax evasion amounting to Rs 1.01 trillion was detected, and Rs 21,000 crore was recovered.
A substantial portion of the expected recovery is likely to come from incorrect claims of input tax credit by insurance companies and GST payments on services provided by expatriates under the reverse charge mechanism. In past years, individuals engaged in fraudulent activities employed various tactics, such as undervaluing taxable goods and services, leading to underpayment of taxes, and making improper use of exemption notifications and input tax credits.
Nonetheless, this year’s efforts to uncover fraud and potential recovery will primarily rely on several compliance measures that have been implemented and amendments made to the GST system to prevent revenue leakage, particularly in emerging sectors. An official highlighted these measures, including the expansion of the scope of Online Information Database Access and Retrieval (OIDAR) service providers to encompass over-the-top platforms and the taxation of expatriates working in India under the auspices of overseas parent companies.
Special initiatives undertaken by both the Central government and state authorities have uncovered approximately Rs 20,000 crore in tax evasion, which is expected to contribute significantly to the overall recovery. Another official noted that the recovery amount could be substantially higher if the Supreme Court supports the GST authorities in their online gaming-related claims.
Additionally, the GST authorities are looking forward to a considerable recovery from blocked tax credits, particularly concerning immovable property construction.
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The Supreme Court has concluded its proceedings and is currently reviewing the case. According to official data, tax evasion from July 2017 to February 2023 amounts to nearly Rs 3.08 trillion, with over Rs 1.03 trillion already reclaimed.
Over the past five and a half years until February 2023, the GST authorities have arrested 1,402 individuals for tax evasion. Between April 2020 and September 2023, more than 6,000 fraudulent cases related to input tax credit under GST, involving more than Rs 57,000 crore, were identified, and 500 individuals were arrested. In the fiscal year 2022-23, approximately 14,000 cases were detected, an increase from 12,574 cases in 2021-22 and 12,596 cases in 2020-21.
