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More compliance, less black money
NEW DELHI: For all those who thought that GST was just an indirect tax reform, think again.
The implementation of GST will affect direct taxes as well, help in widening the tax base and increase tax 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 transactions. By doing this, they save excise, VAT, Octroi etc, and under-report 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,” a tax official said.
Permanent account number (PAN) and Aadhar will be used more frequently, and will be required to file GST returns. This will help the taxmen track transactions more systematically. There can be more data mapping for audit by revenue authorities.
Last year, a panel headed by chief economic adviser Arvind Subramanian had said that bringing alcohol, real estate and precious metals, including gold, within the ambit of GST will help curb black money in the sectors.
Though alcohol is likely to remain outside GST, the other two key sources of illicit money are likely to get busted.
Both the Central Board of Direct Taxes and the Central Board of Excise and Customs have started sharing data to monitor the flow of black money more effectively, sources said.
“If a retailer has purchased goods from a wholesaler and is not showing that purchase today, he will not be able to do so after GST,” a tax official with the Delhi government said. “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 is in the system, scope for black money reduces automatically.”
The dual-monitoring structure proposed within GST, involving the Centre and the states, will also curb tax evasions. So, even if one set of tax authorities overlooks or fails to detect evasion, there is the possibility that the other authority may not.
In the real estate sector, GST will improve tax compliance by developers, builders, property dealers, investors and occupiers, through the mandatory paper trail that GST will create.