NEW DELHI: Back in office, the Modi government is set to take up the next stage of action against tax evasion and money laundering with data analysis helping detect thousands of overstated goods and services tax (GST) claims that don’t match up with income tax returns.
Action against these entities, which might be the first layer of suspicious transactions, is being launched with notices being sent out. The clean-up operation follows the earlier exercise where potential shell companies were scanned and directors were found fake. Many of these companies were struck off the rolls.
This is the first time the government is matching income tax and GST returns and initial findings have pointed to overstatement of GST claims and understatement of income in tax returns, officials told TOI. The action against such entities might be tough with the Supreme Court recently refusing to protect GST violators from arrest.
Data analytics is seen to be the core focus of the revenue department in the coming months as some of the analysis has also pointed to misreporting on the customs front. For instance, some traders have shown inflated imports, remitted funds overseas beyond the requirement and then claimed exports. But the exports proceeds are not reflected in the income tax returns.
“So far, various tax agencies were working in silos but now it’s possible to tally data and go after evaders,” explained an official, adding that thousands of companies were identified based on preliminary data mapping. With the BJP campaign stressing the government’s action against corruption, the revenue department is picking up threads now that the election is over.
For long, tax authorities have complained of leakages in GST but the political leadership at the state and the Centre wanted more time for the new regime to settle down. With polls over, arrests have begun in several cases, with Manpasand Beverages being a prime example. Recent court rulings have also strengthened the tax department’s case to crack the whip.
One of the most glaring gaps noticed by tax officials is the use of shell companies to make bogus claims. In several cases of fraudulent claims, identity theft was also noticed.
In these cases, a company is set up which gets into non-existent transactions with entities that have virtually no real business or is related to them. Tax officials have come across instances of drivers, gardeners or slum-dwellers being directors of these companies.
Based on these transactions, the companies claim fraudulent tax credit. But these transactions and income are not reflected in their I-T returns. Authorities have come across cases where slum-dwellers were made to fill up a form to join a delivery service and details such as Aadhaar numbers were collected. This information was then used to open bank accounts and set up companies. Similarly, domestic helps and drivers were made to fill up forms, ostensibly to open bank accounts but were made to sign on papers to set up companies. Separately, steps are being taken to strengthen other monitoring tools to plug gaps and prevent GST evasion.