GST defaulters beware! Fresh crackdown on tax evaders on the cards

Tax sleuths are planning a fresh crackdown on traders evading the payment of Goods and Services Tax (GST) by seeking new registration for their businesses without revoking an earlier application. The move is aimed at bringing tax evaders to book and prevent GST evasion to the tune of several hundred crores of rupees.

Deficiencies in the current registration process have the potential to substantially bring down GST revenues at a time when the collections have moved up and down and missed targets.

In a circular issued by the Central Board of Indirect Taxes and Customs (CBIC), the authority has instructed its officers to exercise due caution while processing new applications for GST registration.

It said that not applying for revocation or cancellation of an earlier registration will be deemed to be a "deficiency" and could be the reason for rejection of application for new registration for businesses.

Rejection of GST registration means suspension of business activity, as no commercial activity could be performed by an entity that is falling under the GST threshold but is still not registered.

The matter was taken up by the CBIC after it noticed several cases of tax evasion using the re-registration route. 

Under this route, if a trader`s application was rejected on any ground earlier, the information was suppressed and not revealed when a fresh registration was filed. This allowed businesses to evade paying taxes for the period when the first application was filed.

"The changes would help in increasing GST collections as businesses would now find it difficult to evade taxes. As businesses would not be registered if any earlier application is not revoked and tax dues settled, it would be a big disincentive to hide facts," said a tax expert who asked not to be named.

To make the system foolproof, the CBIC has instructed its field formation to verify registration details of businesses with their PAN. If an earlier registration detail is flashed using the same PAN number, its details would be verified and outstanding tax payments would be calculated.

The process will also show if an earlier application was rejected or whether a business filed for the revocation of the said registration application. In either case, registration could be denied if outstanding issues, including tax dues, are not settled.

Meanwhile, GST collections by the Centre is set to miss the budgeted target for the current fiscal by Rs 1 lakh crore. The government had budgeted to collect over Rs 7.43 lakh crore from GST in the current fiscal ending March. However, in the revised estimates, the revenue mop-up has been pegged at just over Rs 6.43 lakh crore.

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So far, in the 10 months (April-January) of the current fiscal, total GST collections by the Centre and states stood at over Rs 9.71 lakh crore. For the full fiscal 2018-19, the GST collection target of the Centre and states was Rs 13.48 lakh crore earlier.

The average monthly GST collection in FY19 so far is Rs 97,100 crore as against a target of over Rs 1 lakh crore.