A big reason for not being able to catch such tax evasion is due to the fact that the government has not, so far, implemented the invoice-matching feature of GST.

The indirect tax department has detected a mismatch of Rs 12 lakh crore between the income declared in income-tax returns (ITR) on account of services and the value of these services declared in the corresponding service tax details in FY16. The mismatch amount is nearly six times the service tax collected in the fiscal.
A similar exercise is under way for FY17 as well. It is believed this is also a reason for the shortfall in goods and services tax (GST) collections in FY18 and FY19. While the government had projected Rs 13.4 lakh crore of GST collections in FY19, it could collect only Rs 11.8 lakh crore.

A big reason for not being able to catch such tax evasion is due to the fact that the government has not, so far, implemented the invoice-matching feature of GST.

The Central Board of Indirect Taxes and Customs (CBIC) has directed zonal heads in the department to probe the anomaly. CBIC collected ITR data from the direct tax department to analyse possible leakages in the service tax regime, which was subsumed under GST in FY17-18. It has also finished an a similar analysis for FY16-17, and has sent the reports to respective zones.

The difference in declared amounts were detected on the basis of permanent account number of ITR filers. CBIC said some PANs from ITRs were not registered in the service tax assessee registry while many registered ones hadn’t filed service tax returns. “In some cases there is simply a value mismatch between the turnover declared in the ITR and the service tax returns,” the chairman said in a letter to field formations.

Admitting that the mismatched amount thrown by the analysis was surprisingly large, a revenue official said one possibility was that ITR forms earlier didn’t have detailed fields for reporting indirect tax details. This was tweaked by the government last year when it included mandatory fields for detailed GST-related information. This would make the exercise for the GST period a more accurate.

Another reason, the CBIC chairman said was the possibility of missing service tax returns, as well as the possibility that services that are exempt from tax were not being declared in the service tax returns. “However, you would agree that the sheer magnitude of the mismatch is a pointer to the possibility of revenue leakage which cannot be ignored,” the chairman said.