Recently, the central government has announced that it is looking for the options to pre-empt GST dodging by taxpayers based on their risk profile. The motive behind this initiative from the government is to prevent the tax evasion under Goods and Services Tax (GST). The assessee, whose profile would appear as “risky” under this scheme would have to face restrictions during issuing invoices, sanctioning of refunds, and utilization of input tax credit in the near future.
Since the launch of GST, the government is working rigorously to prevent tax evasion through fake invoices by taxpayers. Frauds and tax scams worth INR 12,000 crores have been identified by the indirect tax department in the last two years. To add more, a tax official said that the identified scams are a mere reflection of the actual situation of tax evasion in the country. He further said that the identified frauds by the tax department are just 10% in value when compared to the actual tax scams committed, which takes the actual tax evasion value to INR 1.2 lakh crores.
The premier decision-making body under the current GST Regime, The GST Council, has already announced that it has constituted a committee of officers (CoO) for handling tax evasion. CoO will be responsible for the tax-payers risk-based profiling in order to categorize the taxpayers into different categories. The CoO will also be accountable for identifying methods to check the financial credibility of a particular assessee via its GST profile. This recently formed CoO panel will deliver its first report to the GST Council by August 15.
As per the terms of reference (ToR) of the CoO committee, it will also propose changes in the existing GST laws and rules in order to make better profiling and regulations for “risky” taxpayers. The council would also be responsible for suggesting measures that are helpful in implementing the suggested risk-based profiling system on an immediate basis or any other measures and mechanism to control multiple types of tax scams.
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One of the tax officials also said that pre-emptive mechanism to detect tax fraud or scams is a very good mover from the government side. This will help the taxmen to detect the tax frauds before it actually took place. He further said, earlier, the recovery mechanism used after the tax evasion incident was not at all effective and also did not offer any significant results. The fly-by-night operations by tax authorities at tax evader’s home post the scams were mostly ineffective with zero effective results.
