The main reason behind the shuffle of the earlier taxation regime in India was to completely eliminate its disgorging effects. And the regime was even shuffled at the drop of the hat. The government implemented the Goods and Services Tax Act foreseeing its long-term benefits the evasion being at top of the list. But as the time passed by, the government started experiencing contrary actions of the taxpayers trying to manipulate the regime. However, the people would not have to adopt any fraudulent measure if they will start complying with the regime with full honesty. The regime itself is very befitting as it involves benefits like input tax credit and exemption system.
The violation of rules
The Goods and Services Tax Act seemed the best thing since sliced bread to many of the Indian nationals and honest taxpayers. Although the government made efforts to make the regime simpler, some of the businesses constantly kept dodging the rules of the regime. Interestingly, there were only a few small businesses that were trying to boon their revenues through manipulating GST rules, but soon big market players also got involved in the taxation trickery. However, the major processes that these businesses tried to manipulate are:
1. Input Tax Return
2. GSTR3B (Summary form)
Under the GST rules and regulations, these two courses of actions make the taxpayers claim the refund from the government. Basically, when a manufacturer purchases raw material or inputs for the production of a finished good, he pays tax on articles purchased as input. When the product is ready-to-go into the market, then the manufacturer can claim the cumulative taxes paid on the inputs back.
On the other hand, GSTR3B carries the information about all the sale/purchase transactions occurred in a business over the course of a month. This form carries the highest importance as the government has kept GSTR1, 2, and 3 on halt. All in all, GSTR3B decides that how much tax you’d pay and also the return that you’ll get back. As you now know the basics of both the processes, let’s head towards how the taxpayers forged these processes:
The falsified documents
Recently, the small business owners and exporters were found involved in the showcasing wrong business records to the government. Due to this fault and low compliance with GST rates in India 2016/2017, around INR 40,000 crore of ITC remained stuck with the government. Amidst all this, many of the businesses, completely away from dishonest taxation, also had to suffer.
Now, breaking the GST rules and regulations, entered in the scam-game some of the leading telecom industries of the nation. You might wonder that what made them manipulate the rules. Well, the people these days won’t hesitate cutting corners to make a profit. Although you can’t differentiate such acts into voluntarily done or a genuine mistake, they sure are wrong. The taxation authorities discovered inflated amounts in the input tax credit claimed by many leading telecom companies. They even are asked the reason behind such undeniable mistake and sent a legal notice for the same. But that’s the legal part of the process. Due to such fraudulent actions, the government has:
1. Experienced decline in the tax revenue collections
2. Encountered a large number of registrants disagreeing to file returns
3. Brought several changes in GST like e-way bill, exemption, tax rate reduction etc.
What about the common man? One who puts his blood, sweat, and tears to bring two times bread on the desk and still gets caught between such antisocial and un-communal acts. And to ensure that the people who are trying to rise from the soil, the government has long been trying to adjust GST rules and regulations. But is that effective?
Few relieving measures
As we have already chewed enough upon the drawbacks of GST, let’s put some light on the positive developments in the regime. The government has launched the anti-profiteering authority to ensure the correct flow of the credit to the businesses. And as per the rules of the anti-profiteering process, the authority, if finds incorrect invoices or credit claims, can claim the business and ask for the reason. The business, in return, could make the correction or, if denied the order, could be charged a penalty. The government has made a smart move integrating the ITC with the penalty.
As the taxpayers of the nation have struggled in order to gain a momentum to comply with the regime, making it even more complex would bring a drastic decline in the revenues. So, the better option would be to analyze the requirements of the people and thus making effective changes in the regime.
Read Also: A Brief Guide to Input Tax Credit