GST evasion, refund fraud crackdown: Several steps to curb scams proposed

With the narrative shifting from rate increase to tightening the GST system for augmenting revenue, the government has finalised a slew of measures to curb evasion including investigation of major fraud cases by the Income Tax department (I-T) and frequent data sharing by various agencies.

In a meeting chaired by Revenue Secretary Ajay Bhushan Pandey, a panel comprising Central and state GST officers has been proposed to be set up to examine and implement quick measures in a given time frame to curb fraudulent refund claims, including the inverted tax structure refund claims and evasion of GST.

The Committee will come out with detailed procedures which will be implemented across the country by January-end. Considering fraudulent IGST refund claims, the option of linking foreign exchange remittances with IGST refund for risky and new exporters was explored. All major cases of fake Input Tax Credit, export/import fraud and fraudulent refunds shall also be compulsorily investigated by the investigation wing of the Income Tax Department.

Further, a memorandum of understanding (MoU) would be signed among the CBDT, the CBIC and the GSTN to exchange data through API, from the CBDT to the GSTN and the CBIC and vice versa. It was decided that this data should be shared on a quarterly basis, instead of being shared on yearly basis.

Tax experts said that strengthening tax administration is way forward. Data collected by various agencies are going to be the key to identify possible fraud in its early phase."One of the key benefits of GST is data which could be sliced and diced for ascertaining possible fraud or evasion. If GST compliance would go up, the compliance of income tax would also go up," a tax expert said. Among various measures to stop fraudulent GST refunds, the senior GST officers on Tuesday discussed a proposal providing for a single bank account for foreign remittance receipt and refund disbursement.

According to officials, they also explored ways to make the GST system aligned with Financial Intelligence Unit (FIU) for the purpose of getting bank account details and transactions and also PAN based banking transactions.

"This is quite logical and this is how the tax administration is supposed to function. But the government has to ensure that the implementation of various evasion measures on the ground does not result in harassment of taxpayers," said Pratik Jain, Partner and National Leader for the indirect tax division at PWC.