Electronic Bill or the e-way bill has stared from April 1, 2018. E-way bill is an important step towards India’s dream of becoming a digitally driven Tax Economy. E-way bill is an important milestone in the preconceived success story of GST. However, a look at the data for the total number of registers GSTN traders under the new GST Law reveals a slightly discomforting story. Out of the one crore taxpayers in the country, only 12 lakh have opted for e-way bill services. This could create a serious dent in the Central and State governments hopes of increased Tax Revenue.
Traders and The Compliance Dilemma
Habits go hard. Traders fear that the moment one is registered under GST, there is no escape from the GST tax grip. Even if traders refrain from issuing GST levied bills to customers, there is no escape as there is no assurance that the source from where the goods are originally bought will not charge GST on the invoices. On most occasions than not traders have to pay GST for the goods sold to other customer/clients. This makes rigging extremely difficult and risky. Traders fear that audits will surely find any misleadings done in invoices. Tax compliance issues continue to hamper Tax Revenues. The market insecurity may take a while before everything subsides and market attains pre-GST normalcy.
A small-scale retail trader from the state of UP expressed the grievances that perfectly sums up the plight of other small traders like him. According to him, His gross annual turnover was below Rs. 20 lakh which exempted him from mandatory GST registration. However, with future aspirations in his mind and driven by the hysteria surrounding GST at that time, the trader opted for the GSTIN Number. This opened a plethora of obstacles ranging from increased operational costs as well as reduced business efficiency.The strict maintenance of sales record under the new Tax Regime turned out to be an uphill task which had to be outsourced.the trader even had hired an expert professional for the job. But unable to bear the extra upfront operational costs, the trader voluntarily opted out of the GST ambit and cancelled his GST registration. The GST Council needs to lend its ears to this story which perfectly resonates with the plight of other honest traders in the country. However, it no way means that we turn blind to those traders who willingly opted out of GST registration to escape from the clutches of the Tax Authorities.
In Jharkhand, GST has hit the trader/business community hardest. Consumed by uncertainty and fear, business is now carried out a hand to mouth basis. The earlier upbeat small and medium scale investors have now withdrawn from any new investments whatsoever the return promises may be. This attitude is mainly the result of two factors:
- Depression Burdened Sluggish Market
- Fear of Tax Authorities after GST registration.
A major pool of such traders have low turnover and lack basic computer skills. These have little ambitions for their business and live on hand to mouth basis. Besides the fear that GST will take away a chunk of their profits constantly lingers among low and medium scale traders. This fear, ignorance, and uncertainty motivate them to carry out business activities behind closed doors. In most cases, even customers refrain from asking for GST levied bills from the traders. However, an important thing to note here is that most large-scale traders in the state have registered under GST and carry out white transactions.
Ways Adopted by traders to escape GST Radar
India’s second tryst with destiny, for the time being, seems marred by age-old techniques of tax evasion. The methods for tax evasion used during the VAT regime very aptly apply to avoid sales, service, product tax etc. Some of them are discussed below:
Cash Over Card
Only those traders who are selling products or offering services of branded/big companies are filing GST returns. The reason for this primarily being the non-availability of goods and services from branded or big companies without proper bills and invoices.
Zero-rated or Exempted Service Providers
In states like Uttarakhand service providers with Turnover of up to 10 lakhs are exempted from GST. Professionals providing private services like medical, legal, accounting take advantage of this. They mainly deal in cash and conveniently show returns below this amount. Some even go to the lengths of opening multiple subsidiary firms to avoid the tax grip.
Unless and until such blind practices are curbed, the government’s dream of a cashless economy is just a castle in the air. The same emotions could be felt in Finance Secretary Hasmukh Aditya words at the fifth foundation of GST’s IT base ‘GSTN’ network. He very strongly stated that government has now little hopes that the remaining traders, dealers and the transporters would join the GST bandwagon. He also hinted that in future such traders must not complain that they were not warned of the consequences.
Overloaded GSTN Network
Following the disastrous launch, the GSTN Network has been updated and all set for a relaunch this Sunday. National Informatics Center (NIC) and the central government now claims that the GSTN Network can now handle 75 million inter-state e-way bills daily. Although experts still believe that the pressure could still be huge on the network. It must be noted that, during its first release on February 1st, the GSTN Network had crashed badly leaving the Government red-faced. As per GSTN CEO Prakash Kumar, the date for the implementation of the e-bill was kept on February 1, to prevent revenue leakage in Business to Business Transactions. The E-way bill for Interstate started from April 1, whereas the intra-state E-way bill would come into practice from April 15. Transporters need to pay the e-way bill on the transport of all goods whose worth is more than Rs. 50 thousand. E-way bill will be applicable and mandatory across all modes of transport i.e road, railways, airplane and ship.
Nagpur Zone GST Evasion worth Rs 50 crore
Among ongoing tax evasion cases, a major tax evasion worth around Rs 50 crore has been unearthed in Nagpur zone by the Central GST department. As per reports, the fraud was uncovered on the basis of the analysis of return data and through some tips offs. The unavailability of a proper way to match the data in the GSTN leads to tax evasion in the form of unethical ITC claims by businesses in the country. The authority is still relying on the old system of data analysis and informers and takes actions when and if anything suspicious is found.
Read Also: Small Businesses Use Jugaad In GST E-way Bill To Evade Taxes
There are multiple types of GST evasions being reported. Most of these are related to illegal claims of input tax credit, where businesses are either claiming the same credit twice or claiming excess credits as compared to the actual transaction amount. The GST system is currently unable to match or verify the purchases against the claim amount which is leading to more evasion. The department is, therefore, trying to detect evasion by manually cross-checking the data for the suspects.
