The Income Tax Will Share ITR Data With GST For Tax Evasion

Handshake Between The Income Tax Department And GST Will Benefit The Economy

India is a growing economy and one of the fastest developing nations in the world; nevertheless, tax evasion in the country is cutting the economy like a hot knife through the butter. Although India is deemed to be the fastest growing economy with an enhanced military might, there is a stark difference in the standard of living among its citizens. This disparity is partly due to a vast number of tax-payers not contributing or evading tax.

This idea of one nation- one tax is strengthened with the Central Goods and Service Act 2017. A complex political and diplomatic scenario has finally borne visible results. This puts India at the forefront of the investment map globally. But, tax evasion remains a challenge for the Indian economy.

In a range of newly introduced measures to check that, the Income Tax Department will be sharing vital Direct Tax filing details with the GST network officers. Adhering to this smart move by the Income Tax Department, the more significant belief is that that the income anomalies would come to at a standstill to a more considerable extent, if not comprehensively. This move applies to assesses who have business income and file the returns specified for those with this income, i.e. ITR 3 to ITR -7.  

This means business owners have to ensure that the GST returns and income tax returns correlate. Simply put, a business owner declaration of GST/ returns is at sharp variance with the income filed, would come under scrutiny.

What will be the Compulsion of Business Individuals to Comply with The Necessary Changes?

Once passed, this unprecedented regulation, still on papers, would push/force the business fraternity to furnish the exact details of the personal income to that of the sales. This regulation monitors and cut down the growing hiatus between the GST returns and the income tax returns.

What Was the State Before this Unprecedented Idea of Merging Direct Taxes with Indirect Taxes?

In the past, there was a lack of electronic monitoring of indirect taxes and gave enough room for the businesses to evade taxes. Earlier, taxes were filed at various levels of the state. This led to multiple discrepancies. Also, tax returns was filed at the various level without . This made it hard to monitor and enforce regulations. The data was too spread out and too complicated.

What Are the Elements Shared As per the Proposal of the New Amendment by the Income Tax Department?

As per the proposed amendments and changes proposed on 30th April 2019, the Central Board of Direct Taxes will be sharing vital fields with the GST network offices:

  • Status of the Filing of the ITR,
  • Turnover of the Organization,
  • Gross Total Income,
  • Turnover Ratio,
  • Gross Total Income Range,
  • Turnover Range and
    other details as well

To make the process non-biased and spontaneous upon request, the department has made the sharing on demand based and automatic. However, all the applications for the furnishing of such details will be scrutinized by the IT Department.  Such a stand is justified in the event of suspicion.

How the Economy Will Benefit When GST System and Income Tax Department Will Work Together?

Under the GST regime, the economy of India is already benefitting in the following Ways;

  • Reporting of Goods and Services: GST was introduced to simplify the business processes, in line with the one nation- one tax concept. Goods and services being supplied are easier to track and would find it hard to evade detection. With the introduction of GST, it is difficult to move out of value chain however those evading tax still find their way to paying their dues, mainly due to the fact that the Income tax is managed by a different department.
  • Better Compliance: With the rolling of the GST system, movement of the goods & services from the manufacturing to the consumption site cannot remain unchecked and unaccounted. And, when interchange of information between the Income Tax Department and Goods and Services Tax Department will happen, greater accountability, assessment and tracking can be established.
  • Lower Corruption: When the GST system and Income Tax Department work in unison, the instances of corruption and tax evasion will reduce to a minimal. This is owing to the information sharing that will cover the tax evaders from multiple angles. If they are evading via direct tax payments; the irregularities in the income can be tracked and accounted for via the indirect taxes. Thus, it is going to be a win-win situation for the government and the country at large, when the Income Tax Department and Goods and Services Tax System work hand in glove with each other. The foreseeable scenario would only bear positive results for your growing economy.

Read more onAnnual return under GST – Requirements, Eligibility, Format and Rules

Read more on INPUT TAX CREDIT UNDER GST|MATCHING|REVERSAL|RECLAIM


DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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