Focus on Identifying High-Risk Taxpayers in GST Composition Scheme, Advises CAG
Estabizz Fintech Pvt Ltd underscores the Comptroller and Auditor General’s (CAG) recent advisory for the Finance Ministry to spotlight identifying high-risk taxpayers within the GST composition scheme. This call to action comes after a detailed analysis of data spanning from 2019-20 to 2021-22, involving 8.66 lakh composition taxpayers under central jurisdiction. Estabizz champions the CAG’s recommendation to leverage third-party data, including IT returns and vehicle registration information from the ‘Vahan’ database, to validate the declared sales figures and combat potential tax evasion.
Unraveling the Risk Factors
- Audit Insights: An audit reveals that numerous taxpayers might be bypassing the turnover threshold for the GST composition scheme, aiming to retain their eligibility wrongfully.
- Eligibility Breaches: Cases where entities continue to benefit from the scheme despite failing to meet the necessary conditions have been pinpointed, highlighting a serious compliance gap.
Scheme Eligibility and Obligations
The GST composition scheme, designed to simplify tax compliance, is available to taxpayers with an aggregate turnover not exceeding ₹1.5 crore in the previous financial year (₹75 lakh for special category states). However, some are sidestepping the eligibility criteria, notably in declaring their ‘value of outward supply’ and adhering to the reverse charge mechanism requirements for tax filing and payment.
Strengthening Compliance and Verification
Estabizz Fintech Pvt Ltd stands with the CAG in their call to the Finance Ministry for the initiation of a robust, risk-based approach for periodic identification of high-risk taxpayers in the GST composition scheme. This process aims to verify the declared value of outward supply against other sources, including third-party data, to curtail any misuse of the scheme by ineligible entities.
Proactive Steps Forward
- System Enhancement: The recommendation extends to developing a system that can effectively flag and eliminate ineligible taxpayers from the scheme, ensuring that its benefits are appropriately directed.
- Ensuring Scheme Integrity: By adopting these measures, the Finance Ministry will uphold the integrity of the GST composition scheme, preventing its exploitation while fostering a fair tax environment.
In embracing this proactive stance against potential tax evasion, Estabizz Fintech Pvt Ltd advocates for continuous refinement of tax compliance mechanisms. The focus on identifying high-risk taxpayers in the GST composition scheme is a crucial step towards ensuring that the scheme serves its intended purpose of making tax compliance straightforward and efficient, safeguarding against misuse and promoting a transparent business landscape.
As Estabizz Fintech Pvt Ltd, we believe that the continual improvement and strict oversight of financial systems like the GST composition scheme is fundamental to fostering a robust economic environment. Thus, upon examining the findings and recommendations from the Comptroller and Auditor General (CAG), we offer additional strategies for advancing the integrity and effectiveness of the GST composition scheme:
Implementing Advanced Analytic Technologies
- Data Integration: Integrate more comprehensive data analytics tools to scrutinize patterns and anomalies in taxpayer filings more effectively. Utilizing advanced technologies to cross-reference taxpayer data with external databases can help in identifying discrepancies and potential fraud more accurately.
- Periodic Review and Updates: Regular updates to the system algorithms based on the latest trends in tax evasion could help in staying ahead of sophisticated attempts to undermine the tax system.
Enhanced Collaboration with Other Entities
- Inter-agency Cooperation: Enhance cooperation between different governmental and financial institutions to ensure a seamless flow of information. This would include more systematic sharing of data between the GST Network (GSTN) and other financial bodies like banks and state departments.
- Expert Inclusion: Engage with tax experts and technologists to continuously refine the processes that identify risk factors associated with the GST composition scheme.
Community Education and Transparency
- Taxpayer Education Programs: Conduct regular educational outreach efforts to inform small and medium business owners about the benefits of compliance and the risks of circumvention. Transparency about the benefits and obligations of the GST composition scheme can foster a culture of compliance.
- Clear Communication of Changes and Updates: Make all changes to rules and criteria within the GST composition scheme clear and easily accessible to ensure taxpayers are aware of their obligations and any potential alterations in their eligibility status.
Conclusion
At Estabizz Fintech Pvt Ltd, we see these recommendations not merely as safeguards but as essential enhancements that align with our commitment to promote transparency and integrity in financial systems. By focusing on identifying high-risk taxpayers in the GST composition scheme, the government will aid in creating a more equitable environment for businesses to operate. These proactive measures ensure that benefits are delivered efficiently to eligible taxpayers while minimizing misuse and ensuring the economic fabric remains robust and sustainable.
By continually reassessing and enhancing the systems in place, together, we can forge a path towards a more compliant, fair, and financially sound future.
Estabizz Fintech compiled the material in this article using the most recent Acts, Rules, Circulars, Notifications, Provisions, Press Releases, and material applicable at the time. They ensured the completeness and correctness of the material through due diligence. When using this material, users must consult the relevant, applicable legislation. The given data may change without prior notice and does not constitute professional advice. Estabizz Fintech disclaims all liability for any results from the use of this material.
