‘GST collection up because of economic activity revival’: Finance secretary Ajay Bhushan Pandey

Finance secretary rules out the theory of pent-up demand being responsible for the higher GST collection , crediting it to a rebound in business activity and better compliance
By Rajeev Jayaswal | Hindustan Times, Delhi
UPDATED ON JAN 04, 2021 08:22 AM IST

Goods and Services Tax (GST) collection in December was the highest since the launch of the indirect tax regime on July 1, 2017, indicating that the economy has put the brunt of the Covid-19 pandemic behind it. In a conversation with Rajeev Jayaswal, finance secretary Ajay Bhushan Pandey rules out the theory of pent-up demand being responsible for the higher GST collection , crediting it to a rebound in business activity and better compliance. Excerpts:

GST collection in December is the highest ever at over Rs1.15 lakh crore. Is it a reflection of improved business activities or the festive season and pent-up demand?

A: December collection figures reflect business transactions that happened in November. In November, we know that first 10 days were Diwali festival sales for which goods may also have been sold or purchased earlier in the month of October also. We also know that immediately after Diwali there was surge in Covid cases across country that led to reintroduction of movement restrictions, localised lockdowns and curfews in many parts of the country. Further, I don’t think that any pent-up demand factor would have played {a role} here. Pent-up demand, to some extent, was a factor in the months of July, August, September etc. GST collections in December have increased because of greater economic activities and better compliance with targeted approach to curb evasion. During the last few months, we have also made many important systemic changes to ease compliance such as e-invoicing, filing of nil returns through SMS, auto-populating eligible Input Tax credit in GSTR-2B, etc. These all are improving the ease of compliance on one hand and on the other hand, they deter the tax evaders, because they know that it is not long before that they would be caught.

So, your nationwide crackdown against fake GST bills and tax evasion worked. Isn’t it an overreach?

A: For a little more than a year, we have been building internal capacity to do advanced data analytics using AI [artificial intelligence] tools etc on data collected from the returns filed with or other information gathered through various agencies, particularly GST, customs, income-tax department, banks and state governments. We have been working in coordination with each other. Returns filed with various agencies are together being analysed using data analytics and artificial intelligence. Through such data mining, those indulging in fake billings and tax fraud are being identified and through coordinated and concerted efforts of GST Intelligence, DRI and Income Tax Investigation Wing, they are being brought to book. State governments have also been supporting us in this endeavour. In this exercise, the care is taken that no honest taxpayer or business is asked any question, because our every action is data-driven, targeted and pin-pointed towards fake billers and tax evaders.

It seems like a surgical strike to catch a few unscrupulous elements among more than 12 million taxpayers?

A: Our actions have been targeted against unscrupulous persons who indulge in fake invoices and tax frauds. Before we approach any taxpayer or business, we have full information about his financial dealings – from whom he has made purchases, from which fake dealer he has got the bills, etc. Such data is available with us not only for the last few months, but right from the inception of GST in 2017. We also have his entire profile through his income tax returns. And even if fake bills have been taken through layers of intermediaries and shell entities, we have full network diagram and we are in a position to take required action against the entire chain. The result is that during the last one-and-a-half months, 187 persons have been arrested...most of them continue remain in jail because their crimes were so serious that they could not get bail. Five chartered accountants and one company secretary also have been arrested. Totally, over 2,000 cases have been booked and total number of fake GSTIN entities involved are about 7,000. What is more important is that this has underlined the fact that we have approached only about 7,000 companies in a much targeted manner in a tax-base of 1.2 crore entities. That can’t be called an overreach by any logic.

Is it true that the list of GST-registered entities indulging in tax evasion include big corporate houses?

A: It is not fair to name any company at this stage. But, it is true that t unfortunately there are some established big companies who have also taken the fake bills through layers of intermediaries and shell companies and they are being subjected to our investigation. In such cases, we have enough overwhelming evidence so that it will be difficult for anybody to escape action or take a plea that they did not know that the companies that they were dealing with are fake companies. Say, if it has made purchases worth hundreds of crores from a supplier who later turn out to be non-existent, can it claim that it does not know who are these suppliers? Is one not supposed to do due diligence and verify the credentials of their suppliers and quality of goods and services supplied by them before they make such huge purchases. Such large transactions cannot happen without collusion and connivance of purchasers and sellers both.

GST is evolving. What next?

A: Now, we use technology and processes for providing better services to honest taxpayers. We have made many far-reaching systemic changes in GST processes. For example, from the last month we have a facility that tells companies how much input tax credits they are entitled to through GSTR-2B. System is able to calculate eligible Input Tax credit on the basis of returns filed by all its suppliers. While it makes life easy for the honest taxpayers, it also deters the unscrupulous elements who want to take excess input tax credit. We have also brought e-invoicing for those having turnover more than Rs 100 crore. From this month onwards those having annual turnover less than Rs 5 crore will be required to file only quarterly returns instead of filing monthly returns. These will reduce the compliance burden substantially and at the same time will help improve GST collections.

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