Government leveraging data analytics to catch tax evaders

Government leveraging data analytics to catch tax evaders

Government leveraging data analytics to catch tax evaders

Tax authorities have noticed a glaring mismatch in the GST filings and tax reportage of various businesses. This has been evident for some time, however the tax authorities were waiting for the Central and State government leadership to settle down post elections before they could initiate any action.

What has been found?

The tax authorities have noticed businesses under-reporting income while trying to gain benefit from GST input credit. Many potential shell companies are being probed, that have possibly made fraudulent claims and have also participated in identity theft. 

Related: Income Tax Returns: Who should file them and when?

Officials report that ghost businesses are being set up that enter into non-existent transactions with other unrelated businesses. In a lot of instances, drivers, gardeners and slum-dwellers have been found to be the Directors of such companies. Based on the transactions, the businesses claim fraudulent tax credit but the transactions and income do not reflect in their tax returns.

A similar analysis by the revenue department shows misreporting on the customs front. Some traders have overstated their imports, remitted higher than required funds overseas and claimed exports, however, the export proceeds do not reflect in their IT returns.

Related: Everything you need to know about the GST return forms

What is the course of action?

For the first time, the bureaucratic machinery will be comparing income tax and GST returns. The findings suggest over-reporting of GST claims with understated ITR filings. 

The revenue department will be leveraging data analytics to identify tax evasion and misreporting on import/ export duties. Previously various tax agencies were working in silos. The tax department was not able to reconcile a business’ sales returns and IT returns as the sales tax was filed at the state level while the Service tax and Income Tax were filed at the national level.

The Central Board of Direct Taxes (CBDT) via an order issued on April 30, 2019, informed that all important financial information such as IT returns, business turnover, turnover ratio and other relevant data will be shared among concerned tax authorities and GSTN officers.

Related: What does anti-profiteering mean in relation to GST? 

The action against tax evaders will be tough with the recent Supreme Court judgement refusing to protect GST offenders from arrest. Action has been initiated with arrests in the Manpasand Beverages case making national news. 

The tax authorities are looking to further strengthen their monitoring tools to prevent tax evasion. Read this to understand the types of ITR Forms that every taxpayer should know about.


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