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GST - Goods and Services Tax »
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New GST return forms to help authorities check tax evasion
May, 30th 2019

Return forms proposed for the goods and services tax (GST) are set to put an end to one of the widely used methods for tax evasion—claiming rebate for tax that was not paid in the first place.

The new forms, set to roll out shortly starting with large businesses, will prevent companies from claiming any more tax rebate than what they are eligible for, going by invoices issued by the vendors. Under GST, which is a value-added tax system, only the amount of value addition, or margins claimed by businesses at any given point in the supply chain, is taxed. This is done by granting credit to businesses for taxes paid previously on raw material and services. The tax credit system under GST is an improvement over what existed in the pre-GST era, but it was not watertight, said experts. The proposed new forms seek to close this gap.

The original date for businesses to compulsorily start filing the new form was 1 July, but it will be revised for a gradual roll out to avoid any disruption and to give small businesses more time to get on board. The final roll out schedule is likely to be decided when the GST Council meets next.

In the pre-GST era, when businesses paid excise duty, service tax and value added tax (VAT), buyers could seek credits for taxes paid on raw material and services based on the hard copy of the invoice issued by the seller. Now, the seller has to upload details of the transaction, which gets reflected in what is called the buyer’s electronic credit ledger. However, utilizing this credit is based on self- declaration, which the authorities can verify subsequently. Once the new returns are introduced, the need for self-declaration and the mismatches between credits available as per transaction sales that the seller has uploaded in the tax portal, and what the buyer has claimed gets eliminated.

“Prior to GST roll out, there was no electronic way of checking whether the credit taken buy a business is correct. The current GST system is a much improved version, wherein tax authorities can check electronically whether it is correct or not. In the revised return form, credit can be taken only to the extent the transaction details uploaded by vendors allow," said Abhishek Jain, tax partner, EY.

Claiming false credit is one of the commonest ways to evade tax. The other ways include merchants collecting taxes from the end consumer, but not remitting it to the exchequer, as well as selling without invoices. Claiming credit wrongly on the basis of fake invoices has also been a major issue, given that by the time the fraud is detected, those involved would have shut shop and fled. The new form, however, does not mean that businesses will have to submit less information. “The (proposed) regular simplified return requires a whole lot of information, sort of a collation of what was asked in GSTR-1 (relating to sales), GSTR-3B (a summary of transactions) and some additional fields, too. But with the launch of this new mechanism, sellers will upload invoices continuously and buyers will accept/reject and pay tax accordingly," said Archit Gupta, founder and CEO,, an online tax platform.

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