The CBDT (Central Board of Direct Taxes) will make an agreement with the GSTN (Goods and Services Tax Network) about the formal data exchange mechanism so that the Income Tax department and GST authorities can automatically share the information of the taxpayer between each other.
As per the CBDT order that has been issued on 30th April, details that will be written in the agreement include the status of ITRs (Income Tax Returns) filings, gross total income, turnover, and “any other field, the modalities of which shall be decided by the concerned specified authorities”.
As per the words of tax experts, this step will help the authorities in many ways i.e. the tax evasion will be prevented and avoiding under-reporting in direct i.e. income tax and indirect taxes in GST by embedding a formal system. The IT and GST authorities can share the data without any tension because GSTN is now considered as a government entity.
This step has been determined by the Income Tax department while the tax returns were filed in FY 2018-19 to encourage more categories of businesses to issue the turnover under GST and the annual value of supply details.
CBDT instructed in its order to the Principal Director General of Income Tax (Systems) or Director General of Income Tax (Systems) as the “specified Income-tax authority” for issuing the details to the officers of the GSTN portal.
Modalities that will be included
The order stated that the modalities that will be included by the MoU are-
- Exchange of data,
- Maintenance of confidentiality,
- Mechanism for the safety of data, and
- After usage of credits
It said, “While furnishing the information, the specified income tax authority shall form an opinion that sharing of such information is necessary for the purpose of enabling the specified authority in GSTN to perform its functions under the Goods and Services Tax”.
In March 2018, Arvind Subramanian- the Chief Economic Adviser of that time highlighted the point about the necessity of having an unambiguous agreement for sharing the data of the taxpayer with the government departments. He also said that it will help the formal sector employment, economy, and exports of India which will enhance the statistical indicators.
The direct and indirect tax authorities are worried about the decrease of tax and the main concern is to the GST authorities because they recently introduced the new reign in the country and still there is a shortage of revenue collection for the FY which ended in March.
Former Finance and Revenue Secretary Hasmukh Adhia indicated towards the uncertainty of the tax compliance and this happened only with the salaried class a portion of the organized corporate sector who paid taxes said that an effective technology system is the only way to prevent this uncertainty. He also said that, with the help of this technology under GST, it will be easier for the Government to match the dealer’s turnover details and the projected taxation plan under the composition scheme and direct tax respectively.
Rakesh Nangia, Managing Partner, Nangia Advisors (Andersen Global), said, “Facilitation of exchange of data between authorities under income-tax and GST is indicative of the government’s intention not to spare taxpayers from escaping tax payable under any of the laws. With more information in hand, the government would be able to validate the amount of income disclosed both under the Income-tax and GST, which would enable the authorities to identify any under-reporting/non-reporting of income if any”.
Deloitte India partner MS Mani said that it shows the beginning of an approach of the formal process to exchange details of taxpayers between two tax information repositories. Mani said “Businesses need to be cautious in submitting information. It would always be advisable to reconcile information before submission”.
