Haryana saves ₹355-cr by blocking input tax credit

Outgoing additional chief secretary, excise and taxation, Sanjeev Kaushal said growth rate of the state government under Haryana GST Act up to November, 2019, over the corresponding period of previous financial year of 18.11% is one of the highest in the country

The Haryana excise and taxation department was able to safeguard revenue worth ₹355 crore by developing a mechanism for blocking inadmissible input tax credit under the Goods and Service Tax (GST) regime.

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Outgoing additional chief secretary, excise and taxation, Sanjeev Kaushal said growth rate of the state government under Haryana GST Act up to November, 2019, over the corresponding period of previous financial year of 18.11% is one of the highest in the country. Similarly, a growth rate of 32% in the last five months of the current fiscal over the corresponding period of previous financial year is one of the highest. He said this growth rate has been possible because of certain anti-evasion drives by the department for augmentation of GST revenue including blocking inadmissible input tax credit.

Haryana first to develop blocking mechanism

Kaushal said Haryana is first to develop a mechanism for blocking inadmissible input tax credit to protect government revenue. “We were able to block input tax credit of about ₹355 crore, which is a big saving for the government,’’ he said.

Input tax credit is the credit manufacturers get for making payments of taxes pertaining to inputs utilised in manufacturing products. The outgoing ACS said the input tax credit gets blocked by the Haryana tax officials under Section 17 (5) of the Central GST Act whenever there is a suspicion of bogus dealer, where the firms have been found to be non-functional, wherever traders come up with huge inventories of goods during the transition phase between phasing out of value added tax (VAT) and initiation of GST, traders who had claim transitional credit in excess of their lawful entitlement.

“The functionality of blocking and unblocking input tax credit is an important measure for safeguarding the government revenue, particularly in cases of fraudulent activities by the taxpayers,” he said.

Top 250 taxpayers monitored

The ACS said a large percentage of tax was accrued from a small pool of taxpayers. In case of Haryana, 250 taxpayers account for 40% of the state GST revenue and 6,160 taxpayers account for 80% of it. “Thus, we set up a special cell for monitoring top 250 taxpayers of the state. As a result of regular monitoring, the tax compliance in this pool of taxpayers has shown a 10 % increase in 2019-20 fiscal. In the last seven months, a total of 41,549 returns were received from these taxpayers against 38,494 during the previous financial year,” Kaushal said.

Also, a special drive to bring in more taxpayers under the tax net particularly in sectors which were exempt in the pre-GST regime like textile and pesticides, identification of over 50 firms indulging in fake invoicing and circular trading and physical survey of new taxpayers were some of the measures which helped the state government record a higher tax growth. Due to enquiry into high risk taxpayers, physical verification of credentials of the taxpayers and other intelligence, a total of 190 bogus firms were identified in the state. They have been held responsible for evasion of ₹157 crore tax. Over 100 FIR’s have been registered against fake firms and recovery of ₹46 crore has been effected from the violators.