In a stellar move to tighten reigns on businesses evading taxes, the government has taken another step forward towards nabbing defaulting businesses. Prior to introduction of the GST regime, the Income tax department was literally handicapped with no access to data submitted by businesses in their sales tax returns, service tax returns and ITR. The primary reason behind the same was the fact sales tax returns were filed at the various state levels while service tax returns were filed at the national level.
With GST’s arrival, exchange of data between GST department and Income Tax department has become possible because with GST all returns filed by businesses are available in a centralized location. In order to help with this reconciliation, Central Board of Direct Taxes (CBDT) has issued an order on 30th April 2019 stating that they will be issuing access to following key data points of businesses with the GSTN officers-
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An Excerpt from the Order by CBDT-
“In exercise of powers conferred under section 138(1)(a) of the Income tax Act, 1961 (‘Act’), for purposes of sub-clause (i) of section 138(1)(a) of the Act, the Central Board of Direct taxes (‘CBDT’) hereby directs that Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), New Delhi shall be the specified income-tax authority for furnishing information respecting assessees to the Nodal Officer, Goods and Services Tax Network (‘GSTN’).”
The following are main practices that are deemed to be tax evasion:
- Concealing the Income.
- Claiming excessive expenditure.
- Falsification of accounts.
- Inaccurate financial Statements.
- Not reporting income.
- Storing wealth outside the country.
- Filing false tax returns.
- Fake documents to claim exemption.
All business assesses who have business income and file the returns specified for those with this income i.e. ITR 3 to ITR -7; will fall under this signature move of the government. As per the CBDT order, this exchange of information and data will have to be request based and IT department will need to determine whether this data is necessary for GSTN to scrutinize the business/es in question.
What does this translate for businesses?
The erstwhile mismatch in the figures of turnovers furnished by SMEs in Income-tax returns and Sales returns will have to become a thing of the past. Signing of this MOU between the I-T Dept. and GSTN will ensure that the taxpayers furnish same set of information in income-tax return and GST return.
For example: Putting money in a 401(k) or deducting a charitable donation are perfectly legal methods of lowering a tax bill (tax avoidance), as long as you follow the rules. Concealing assets, income or information to dodge liability typically constitutes tax evasion.
A business person whose income as per ITR is sharply at variance with what is declared in his or her own GST returns Filing would come under the lens. To avoid coming under government scrutiny, businesses need to ensure that the amount of income disclosed both under the Income Tax and GST should match.
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