States panel likely to bat for system tracking dealers' transactions

The panel may also suggest integrating the Goods and Services Tax Network with NPCI to curb frauds in tax refunds

The panel of state finance miinisters looking at reforms in the goods and services tax (GST) system may propose putting in place an arrangement to keep track of dealers’ transactions and link them with the e-way bill system so that “bogus dealers” could be traced.
 

The move helps in tackling fake invoicing and regulating the flow of input tax credit (ITC).

The panel may also suggest integrating the Goods and Services Tax Network (GSTN) with National Payments Corporation of India (NPCI) to curb frauds in tax refunds.

These are part of the recommendations by the Group of Ministers (GoM). These, along with inputs from states, are likely to be in the final report, expected to be taken up in the GST Council meeting in April. The GoM, headed by Maharashtra Deputy Chief Minister and Finance Minister Ajit Pawar, has been tasked with identifying potential sources of evasion and suggesting changes in business processes and IT systems.

The panel is learnt to have recommended a feedback mechanism in the case of misconduct in businesses such as utilising fake ITC, passing on credit without supply, and spikes in passed/utilised ITC.

“On dealers’ transactions, GSTN should develop a system where it should keep track of purchases. So far, all accountability and tracking are at the sales level, but it is required to keep a tab on manufacturing as well,” one of the panel members told Business Standard.

He said if a new dealer sold 80 per cent of the purchases outside the state, this should be reported to the jurisdictional officer. The system should also flag this to officers where the recipient of the supplies is registered. 

Tax experts say to track dealers’ transactions, e-invoices should be made mandatory for all transactions on which credit can be taken.

E-way bill data needs to be linked to that on transporting vehicles obtained from toll plazas, said Bipin Sapra, tax partner, EY.

E-invoicing will apply to businesses with more than a Rs 20-crore turnover from April 1, 2022.

The government has taken measures to curb the misuse of ITC. For instance, the Union Budget in 2022 brought amendments to the GST regime, restricting such credits unless suppliers had remitted their share of taxes. While the provisional ITC is being scrapped, specific restrictions will apply for getting it.

Other recommendations of the panel include using biometrics to curb GST evasion, physical inspections of businesses, tightening pre- and post-registration processes, and certifying taxpayers’ bank accounts from NPCI.

“Linking GSTN with NPCI will allow verifying proper bank accounts and checking the flow of money into verified accounts,” Sapra said. 

Apart from this, the panel suggested taking import and export data of the Central Board of Direct Taxes for possible integration.