Possibly for the first time the government has matched income tax returns with GST returns of business entities and sent out notices to those showing mismatches. ET.com had informed readers in advance that the government would match this data indicating that action of this nature may follow. Read ‘Tax dept to share data with GSTN to detect tax evasion’ published on -by ET.com
As per Times of India (TOI) report, this is the first time government is matching income tax and GST returns. The initial findings have reported the overstatement of GST claims and understatement of income in the ITRs, as per officials. The recent Supreme Court judgement has also made it tough for these entities by refusing to allow protection to GST offenders from arrest.
This a result of the government is using data analytics to curb tax-evasion. In an earlier article, ET.com has first informed its readers that the government was moving in this direction. Central Board of Direct Taxes (CBDT) issued an order dated April 30, 2019 where important financial information such as status of ITR filing, turnover, gross total income, turnover ratio and other data as decided by the concerned income tax authorities and GSTN officers will be shared.
As per tax officials and chartered accountants, prior to introduction of GST, the department could not reconcile the data filed by the business person between his/her sales return and tax return. The reason being, sales returns were filed at state levels whereas service tax returns were filed at national level along with tax return.
With the matching of data between GSTN and Income Tax Returns (ITRs), arrests in several cases have begun with Manpasand Beverages being a prime example, as per the TOI report.
This move reflects the increasing use of data analytics by the government to detect and catch tax-evaders. As per the report, tax officials have also noticed the use of shell companies to make bogus claims. In some cases, even identity theft was noticed.
In such cases, a company is set up which shows non-existent transactions with entities that have virtually no real business or is related to them. Based on these transactions, the companies claim fraudulent tax credit.
Tax officials have noticed instances where drivers, gardeners or slum dwellers were shown as directors of such shell companies.