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Government tightens VAT noose around 66,000 businessmen in drive to recover crores of rupees
March, 07th 2013

The Delhi government has initiated one of the biggest ever crackdowns on tax evaders in a bid to claim hundreds of crores of unpaid taxes.

The trade and taxes department of the state government has zeroed in on over 66,000 businessmen after discrepancies in their accounts showed up while analysing their sales tax data and audit of accounts.

Officials say that the extent of Value Added Tax (VAT) evasion ranges from a few lakh for some companies to a few hundred crore for big tax dodgers.

There are many big infrastructure companies which do not cooperate with the tax department during raids (file picture)
Prashant Goyal, trade and taxes commissioner of Delhi said: "We have started screening sales tax returns of traders to detect the defaulters and shockingly thousands of dealers, including small and big ones, have been found to be defaulters."

The sales tax data and audit help officials gauge the extent of sales and identify possible evasion of VAT. Considering the extent of tax evasion in the city, the department has tightened its noose around the defaulting businessmen.

"We have detected huge fraud involving businessmen whose transactions are in hundreds or thousands of crores annually," said a senior official, adding that in one case tax evasion of over Rs 300 crore was detected involving a reputed infrastructure company.

Sources said the major exercise covered companies engaged in diverse businesses – infrastructure, construction, banquet halls and restaurants to name a few.

"We have issued notices to the companies and many of them have challenged them in court. In some cases, they have approached the Supreme Court after getting no relief from the high court," said the officer.

VAT rates vary from 5 per cent to 12.5 per cent of sales depending on the nature of the business. Giving details of raids, an official said that a Reebok godown was raided in the city and items worth over Rs 100 crore were recovered.
"When we asked for the documents, they were unable to produce them. Finally, we had to seal the godown," said an official of the trade and taxes department.

In fact, the absence of business records is one of the problems that officials face while conducting raids. Several were conducted last month. Tax officials often ran up against a wall when it came to getting these records.
Many companies did not keep them at their registered offices in Delhi but at their Gurgaon offices. That's when the tax officials decided to seal the offices and issue notices.

The officials say tax evasion takes place in many ways. In the case of banquet halls and caterers for instance, bills are fudged to enable tax evasion.

"If they charge Rs 1,000 for a plate, they will show us the charge was Rs 500. If they have catered to 10,000 customers, they will show us details of 7,000 customers or less," said a senior official.
Under scanner

Trade and taxes commissioner Goyal said that in the case of bigger businessmen having larger turnovers, the department has started auditing their business accounts to detect tax liability.
"Instead of surveys and raids by the department's officials, we have started auditing their accounts with the help of chartered accountants (CAs). These CAs analyse the documents and records to detect tax liability," said Goyal.
A senior official said that auditing of accounts have been started for greater transparency and to avoid manipulation by the department's officials.

"There are chances that officials may strike a deal with the businessmen to settle the matter. Keeping this in mind, we have started taking the help of CAs," added the officer.

There are about 2.80 lakh traders registered with the trade and taxes department. Goyal believes that if traders start complying with rules the department will easily cross the target of Rs 16,500 crore on tax collections.
The department has collected about Rs 14,000 crore as against the target of Rs 16,500 crore.

"We want to appeal to the traders and dealers to cooperate with the department in the tax collection exercise," said Goyal.

The department has also started targeting contractors who have so far avoided paying tax on work contracts.
"There are many big contractors having outstanding tax liability of more than Rs 100 crore. But, strangely, they will not pay taxes and they will prefer to go into litigation. This has become a common trend," added Goyal.
There is a counter view. Delhi BJP president, Vijay Goyal said that traders are the biggest contributors to the government exchequer and they should not be treated as tax thieves.
"Rules and regulations should be simplified and there should be transparency in the department," added Goyal.

Meanwhile, traders associations have complained of harassment and manipulation by officials of the department.
Praveen Khandelwal, secretary general of the Confederation of All India Traders, said: "We want to stop any kind of tax evasion, but the department has to ensure that traders are not harassed during raids and surveys."

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