For all those who thought that the goods and services tax or GST was just an indirect tax reform, should want to think again.
The implementation of GST is going to effect direct taxes, helping in widening of the tax base and increasing the taxes collections.
According to tax administrators, GST will help in curbing domestic black money. “Though it is a reform for indirect taxes, there are filers who understate incomes by not reporting each and every transaction. By doing this, they save excise, VAT, Octroi etc, and more importantly, are able to furnish under reporting of their incomes. Since, GST will have a paper trail which can be accessed by the income tax department such practices will discourage generation of black money in the system,” said an income tax official.
Usage of PAN and Aadhar will be more frequent and will be required to file GST returns, this will help the income tax department to track transactions, which it is unable to do today. There can be more data mapping for audit by the revenue authorities.
Last year, a panel led by chief economic advisor Arvind Subramanian had said that bringing alcohol, real estate and precious metals such as gold sectors within the ambit of GST will help curb black money generation in these sectors.
Though alcohol is likely to remain outside the GST net, the other two key sources of illicit money are likely to get busted.
Sources say that revenue department has already taken a note of this fact and both the tax boards; central board of direct taxes and the central board of excise and customs have already started sharing the data with each other to better monitoring of black money.
A tax official in the Delhi state government feels “ if a retailer has purchased goods from a whole seller and is not showing that purchase today, then he will not be able to do so after GST. Thus, to substantiate his purchase he will have to maintain the books of sales for which proper bills will be generated. So any trader after GST will not be able to sell products or goods without bills. Once a bill exists in the system, scope for black money reduces automatically. Creating self-policing environment.”
The dual monitoring structure proposed within GST, involving the Centre and the states will also curb income tax evasions. So, even if one set of tax authorities overlooks or fails to detect evasion, there is the possibility that the other overseeing authority may not.
In real estate, a sector which absorbs and generates maximum amount of black money, the uniform tax structure will improve tax compliance by developers, local builders, property dealers, investors and occupiers. The mandatory paper trail that GST will create will go a long way in improving tax compliance.