GST officers bust 48 fake firms availing fraudulent ITC of over ₹199 crore

GST officers bust 48 fake firms availing fraudulent ITC of over ₹199 crore

Subject: Economy

Section: Fiscal policy

Context: The Central Goods and Services Tax (CGST), Delhi East Commissionerate, commenced coordinated ‘Operation Clean Sweep’ against fake billers, based on gathered human intelligence, which was further developed through data mining and data analysis

Concept:

Goods and Services Tax (GST)

Goods and Services Tax (GST) represents the cornerstone of India’s taxation system, embodying the principle of “One nation, one indirect tax” to establish a unified common market.

The genesis of GST can be traced back to 2003 when the Kelkar Task Force on indirect taxes proposed the consolidation of various central and state indirect taxes into a singular, comprehensive framework.

To facilitate this monumental reform, an Empowered Committee of State Finance Ministers was formed, tasked with reconciling differences and advancing the implementation of GST.

Key Features of GST:

• Unified Taxation: GST involves a single tax on the supply of goods and services throughout the supply chain, from manufacturers to consumers.
• Destination-Based Tax: Unlike the existing origin-based taxation, GST is a destination-based tax.
• Value-Based Tax: Input tax credits are available at each stage, promoting a value-based approach.
• Tax Subsumption: At the central level, GST subsumes taxes such as Central Excise Duty, Additional Excise Duty, Service Tax, Countervailing Duty, and Special Additional Duty of Customs. At the state level, it includes State VAT/Sales Tax, Entertainment Tax, Central Sales Tax, Octroi, Entry Tax, Purchase Tax, Luxury Tax, and taxes on lottery, betting, and gambling.
• Federal Structure: Given India’s federal structure, GST comprises Central GST (CGST) and State GST (SGST) simultaneously levied across the value chain on both goods and services.
• Online Administration: The Goods and Services Tax Network (GSTN), established by both central and state governments, facilitates online tax payments and credit transactions.

Features

Simultaneous Powers: The act confers simultaneous legislative powers upon the Parliament and State Legislature to govern GST.

• Tax Subsumption: It involves the subsuming of central and state taxes under GST, including the levy of Integrated GST (IGST) on interstate transactions.
• GST Council: A constitutional body, the GST Council, with 2/3rd representation from states and 1/3rd from the center, examines GST-related issues and makes recommendations on rates, taxes, cesses, surcharges, exemption lists, and dispute resolution.
• Compensation: States are provided compensation for the entire amount of revenue losses for a period of 5 years.

Benefits of GST:

For Business and Industry:

1. Easy compliance with a single tax.
2. Creation of a unified market promoting ease of doing business.
3. Removal of cascading taxes, reducing prices and boosting demand.
4. Improved competitiveness and reduced transaction costs.
5. Support for the Make in India initiative.

For Consumers:

1. No cascading burden of taxes, moderating inflation.
2. Increased transparency in the taxation regime.

For Government:

1. Simplified administration and self-policing through the input tax credit system.
2. Dual monitoring by the center and states, fostering tax competition and cooperation.
3. Better control on leakages, leading to higher revenue efficiency.
4. Increased funds for welfare expenditure.

Input Tax Credit (ITC):

ITC is the tax paid on purchases that businesses can use to reduce their tax liability when making a sale

While it offers advantages, concerns exist over its potential misuse, including the issuance of fake invoices.

The current system lacks real-time matching of ITC claims with taxes paid by suppliers, prompting the need for further regulatory measures.