What would you attribute the record GST collections to?
During the last few months, we have seen an upward trend in economic activity, which is reflected in the data. In October, we had 6.41 crore e-way bills and in December, around 6.42 crore were issued. It is the first time that GST collections have crossed the Rs 1.15 lakh crore, based on November transactions.
After Diwali, there was a surge in Covid cases in some parts of the country and some restrictions were imposed. It demonstrates that the economy is going in positive territory. It also shows much higher compliance and one of the reasons is that we are now using data extensively.
During the last one-and-a-half months, this targeted action has led to the arrest of 187 persons, including five chartered accountants and one company secretary. Our actions are very specific. We are not going based only on last month’s transactions but anyone who has taken or issued fake bills since the start of GST is getting exposed due to data analytics.
We are using income tax data and often it shows that some people with income tax liability of just a few lakh rupees are showing very high turnover in GST. There is coordinated action between the income tax department and GST. Getting fake bills results in siphoning of funds, which will also attract higher penalty under income tax.
Another very important thing on GST is to prevent unscrupulous elements from taking input tax credit. Now, from the returns of their suppliers, we can get how much tax credit should be given. We are now flashing the figures at the time of filing so that taxpayers know what their entitlement is, and any higher claim may require some explaining.
Further measures have been notified in consultation with the states, which will also help. We want to honour the honest and uncover the unscrupulous elements. We are hoping that the collection trend will continue.
You started data analytics around one-and-a-half years ago. So why did the department go slow in between? Six-seven months can be explained due to Covid.
Triangulation of data between GST, income tax and customs started last year. While we had come to a certain stage, Coronavirus hit us, and we had to issue instructions asking officers to suspend any notice, survey etc. From October, we resumed field actions.
Our actions are specific, and we go with a full network diagram, ensuring 100% success rate. We can pinpoint specific cases of issuance of fake bills and those who have taken benefits using these fake bills. No matter how many layers they create to route their transactions, they are all getting caught.
By all accounts, the economy is working at 90-95% of pre-Covid capacity and several services are still impacted. You had assumed an average monthly collection of around Rs 1 lakh. So, can we estimate that there was 15-20% of the leakage in GST revenue all these months?
We will have to watch the data for a few months. But broadly, if the economy is moving at a certain pace and collections have gone up by certain extent then we can say that there is a certain degree of improvement in compliance.
There seems to be a mismatch between collections and what’s happening in the economy in terms of core sector data and the fact that hotels, airlines and entertainment are not near Covid-levels. Is it also because of the increase in prices given that inflation is around 7%?
Maybe some part of it could be due to that. . But one needs to watch for a few more months to come to any definitive conclusion. Since we do not get data based on HSN (product) codes, it will take time to get granular data.
Do the GST numbers also tally with income tax and customs trends?
As of December, income tax collections are down by 9.9 % with Rs 7.7 lakh crore gross direct tax collections. When two quarters have been badly affected, corporate profitability is hit. In addition, we had also reduced the TDS by 25%. Plus, dividend distribution tax, a major source of revenue, was abolished.
On the customs side, collections have hit Rs 16,000 crore in December, as against around Rs 12,000 crore in November. This is partly because of faceless assessment as it has helped reduce connivance at local levels.
There were 1.6 lakh suspect entities and you have tightened the registration norms, refunds. How will you ensure that businesses are not inconvenienced because there is a growing view that revenue officers have made a comeback on the customs and excise side?
All our action is based on data analysis and there is no randomness. Out of 1.2 crore GST taxpayers, only a few thousands have been touched. We will maintain the trust and ensure ease of doing business for those carrying out business according to the rules.
What is the extent of invoice matching?
Since November 2019, we were matching around 80% of the invoices due to a cap on input tax credit. From last January, we reduced the cap to 10% of what the suppliers have required. So, 90% invoice matching is happening. Now, 10% is further reduced to 5% from January 2020. This will ensure 95 % invoice matching.
The system calculates the tax credit based on returns filed by suppliers. From April onwards it could be tightened further to take it to the level of 100 % invoice matching.