Punjab's value-added tax (VAT) collections have perked up lately - courtesy big businesses. But there are huge frauds, running into hundreds of crores of rupees in some cases, where dealers have taken the state government for a ride by showing bogus sales and filing VAT returns to claim refunds.
While a handful of firms 900 (merely 0.4%) are driving the increase by contributing about 90% of the total revenue of the state, nearly 1 lakh registered traders (around 40%) of Punjab pay no tax, indicating massive tax leakages.
For example, the government has detected that a firm reported bogus sales to the tune of Rs 400 crore to claim huge tax refund, while another firm claimed Rs 70-lakh refund by showing to have transported 20 tonnes of steel on scooters. In another case, a firm showed exports of Rs 33 crore to Bangladesh and claimed Rs 1.5-crore refund. When a team was sent to the customs office at the Bangladesh border, the officers there stated in writing that office rubber stamps used by the company were bogus.
Sukhbir honours highest taxpayers
"We will not only recover the tax but also register cases against those evading tax," deputy chief minister Sukhbir Singh Badal said on the sidelines of a first-of-its-kind function where he honoured 198 highest taxpayers (traders and manufacturers) from across the state here on Thursday.
There are about 2.35 lakh registered dealers in the state who contributed to generating Rs 14,544-crore revenue in the last fiscal (2012-13). But the major tax share comes from 900 dealers who pay above Rs 1 crore annually.
Giving a PowerPoint presentation, the deputy CM admitted that traders were indulging in "huge frauds" to evade tax payments, saying that the motive behind honouring leading taxpayers was to "differentiate between good taxpayers and fraudsters."
"Reputed companies forged entries to evade tax. In certain cases, the firms claimed refund on the basis of bogus transactions," Sukhbir admitted. "Fraudulent traders have made the practice of claiming bogus VAT refunds without even paying taxes to the government," he added.
A mere 10 firms (see box) of the state contribute 28% of the total revenue; 53% of the total revenue is generated from commodities such as petroleum and petroleum products, automobile and auto parts, foodgrains, iron and steel, electronic goods, cement and its products, alcoholic products etc.
Sukhbir said: "It is because of you (tax-paying traders) that our state is running. Because of you, we are developing our state,"
Star rating system
The primary reason behind the delay in refunds to dealers, the deputy CM said, was "huge frauds" by certain companies/traders.
Now, to eliminate frauds in VAT refunds, the government will start a 'star rating system' for fast-tracking refunds from December. Under the system, the highest taxpayer would be granted 'five-star' status, to whom refunds would be paid within 15 days. The four, three and two-star-rated traders would be able to get refunds online within 25, 35 and 45 days, respectively.
In a bid to enlarge the ambit of collecting tax and plugging leakages, the state government on Thursday announced a unique voluntary disclosure scheme (VDS) for dealers who have committed frauds or mistakes while submitting their returns and paying tax. "But we are giving an opportunity to such traders to rectify their mistakes," Sukhbir said.
Under the VDS, the dealers would have to submit applications by December 31, stating the mistake committed by him/her and giving an undertaking to deposit the correct/actual tax due along with 1.5% interest from the day the tax was due.
The excise and taxation officer (ETO) will calculate the tax due and inform the applicant within 30 days, who have to deposit 25% of the tax due plus interest within a month. The dealer may pay the balance of 75% within another 60 days.
Top-10 taxpayers (Rs in crore, annual)
2,367 Indian Oil Corporation
375 HPCL-Mittal Energy Limited
211 Bharat Petroleum
162 Hindustan Petroleum
123 Mahindra and Mahindra commercial vehicles
120 Tata Motors commercial vehicles
113 Ambuja Cement
104 Hindustan Lever
102 Samsung India Electronics
VAT payment by dealers (annual)
46,374 Up to Rs 1,000
7,833 Rs 1,000-2,500
29,578 Rs 10,001-50,000
3,292 Rs 5-10 lakh
3,488 Rs 10-50 lakh
622 Rs 50 lakh-1 crore
900 Above Rs 1 crore
New Traders' Policy-2013
* Single-stage taxation from January
* Health insurance scheme of Rs 50,000
* Fire insurance cover of Rs 5 lakh
* Corrupt officials to be dismissed from service
* Helpline to lodge complaints
* Voluntary disclosure scheme