Taxpayers may have to explain discrepancies in I-T, GST returns

Taxpayers may have to explain discrepancies in I-T, GST returns

Government moves to link databases to get all relevant details of a firm, use fraud analytics to look for evaders

The annual return forms for goods and services tax (GST) may ask taxpayers to explain any discrepancies between their income tax and GST returns as the government seeks to tighten rules to deter companies from evading taxes.This is part of the government’s efforts to collate all available sources of information in order to get the 360-degree profile of a taxpayer. The government is trying to link different databases to get all relevant information about a company—financial transactions, registration information and direct and indirect tax filings—and use fraud analytics to look for tax evaders.

However, initially to deter taxpayers from evading GST by understating their turnover, the annual GST return form will seek details of taxpayers’ income tax return filings to see if they are understating sales turnover.“The annual returns GSTR 9’s format is being finalized. We will be asking the tax payer to disclose the details of their income tax declaration and explain the discrepancy if any,” an official familiar with the development said, on condition of anonymity.

“While the annual GST return contains details about sales and purchases, the income tax return of a company is in effect the income that is derived from the difference of sales and purchases,” the official added. “So the taxpayer will file the income tax return by 30 September and then the GST annual return by 31 December,” the official added.

Businesses are required by law to audit their results and have to file their income tax returns by 30 September. The law has provisions that require taxpayers to give details about their audited financial statements as well as a reconciliation statement in the annual GST return.The annual GST return will be a detailed collation of sales and purchases made during a year by a company under the three different types of taxes—central GST, state GST and integrated GST.

As per the laws, the annual return form or GSTR 9 has to be filed by December for the previous financial year. The last date for filing the annual tax return for 2017-18 is 31 December 2018. However, with the new tax return form yet to be put into place, it is unclear if this deadline will be extended.

Experts said that exchange of information between direct and indirect tax authorities will significantly enhance tax compliance in the economy. “It will not only add new assessees, but also leave existing direct tax assessees with no other option but to report their sales accurately,” said Amit Singhania, partner at law firm Shardul Amarchand Mangaldas and Co. Since both GST and income tax filings are linked to the permanent account numbers (PAN) of the tax payer, sharing information becomes easier for direct and indirect tax authorities.

The government is working to scale up the share of gross tax to gross domestic product (GDP) from 11.6% in FY18 to 12.1% in the current financial year and then to 12.7% in the subsequent two years. Intense data mining after the 2016 November demonetisation has already helped the government step up direct tax receipts as well as the number of tax filers. In FY18, provisional figures show a net direct tax growth of 17.1% from a year ago to Rs9.95 trillion.

The Mint, New Delhi, 08th May 2018

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