Council weighs GST’S integration with NPCI
BENGALURU/CHANDIGARH: The Goods and Services Tax (GST) Council will consider several measures to prevent tax evasion at its two-day meeting starting Tuesday as central and state governments face increasing pressure to mobilise revenue to manage spiralling deficits.
The steps, part of the sevenpoint recommendations made by the group of ministers on system reforms, include real-time validation of bank accounts by integrating the GST system with the National Payments Corp. of India (NPCI) and tougher measures using data analytics-led enforcement to boost compliance. The report by the panel, led by Maharashtra deputy chief minister Ajit Pawar, will be taken up by the council at its meeting in Chandigarh.
Improving tax compliance to boost revenue collections comes as rising inflation makes it difficult for the GST Council to raise taxes despite widening budget deficits. Higher tax collections will also ease pressure on revenue mobilisation through nontax measures such as disinvestments and come as a relief to states that are likely to lose GST compensation from July.
According to the proposals, the data from verifying bank accounts will be made available to tax officers by the GST Network, the information technology backbone of the indirect tax regime, to prevent revenue leakages. This will help officers monitor high-risk category of taxpayers on a real-time basis and ensure only refunds that meet bank account validation criteria go through, a government official said, requesting anonymity.
The panel also recommended physical verification of businesses through geocoding. In addition, the GST Network is also developing an app that will allow businesses to capture location details and images.
The proposals seek to check the incorporation of entities that deal in bogus transactions without economic substance. Geotagging is now done under the
Companies Act to ensure businesses have a physical premise and are not just paper entities. A similar provision is now proposed under GST laws, too. This will allow tax officers to visit premises and inspect books of accounts if needed.
The panel also suggested adopting artificial intelligence (AI) and machine learning (ML) systems to identify high-risk taxpayers and use a biometric registration process. The GST Council may also approve mandatory physical verification of high-risk taxpayers as determined using AI and ML technology.
The extensive use of technology and geo-tagging would also ensure that potential evaders who pose a threat to their business customers are highlighted in advance, said MS Mani, a partner at Deloitte India.
Tax consultants insisted that the measures be implemented without causing difficulties to businesses. Clear norms must be issued to ensure that taxpayers are not harassed, they said.
“It would be great if this information can also be shared in some manner with taxpayers so that they are aware of the risky vendors they may be dealing with. Further, it’s critical to implement such measures in a manner that causes limited or no business disruption,” said Pratik Jain, a partner at Price Waterhouse & Co. LLP.