The government proposes to match GST data mentioned in Form 26AS with the turnover numbers provided while filing income tax returns.
The move is aimed at identifying unscrupulous persons who try to avail or pass on input tax credit fraudulently by generating fake invoices. In such cases, the revenue department had found that checking income tax profiles of suspected entities gave the right results on the extent of tax evasion, both on direct and indirect taxes.
Sources said that there is no reconciliation of whether a suspected entity’s income tax payment is commensurate with the expected profit margin on turnover reported by him in the GST returns or additional compliance burden on taxpayers.
Only suspected fake invoice generators are being identified for serious action under GST and other laws including suspension of their GST registration based on the fact that whether their income tax payment is commensurate with the expected profit margin on turnover reported by them in the GST returns.
The revenue department explained that recently, it was noticed that many unscrupulous persons are trying to avail or pass on input tax credit fraudulently by generating fake invoices.
In a nationwide drive against fake GST invoice frauds, started last Monday, 25 arrests were made within four days. Fake invoicing is now been handled with very serious measures as this results in substantial leakage of both direct tax and indirect tax revenue.
It may be noted that in order to tackle the problem of fake invoices, the revenue department has already formulated a strategy for identifying these fake invoice generators which inter alia takes into account the income tax profiles of the suspected fake invoice generators.
These persons in most of the cases never file their income tax returns or disclose very meager taxable income in the income tax returns. The suspected fake invoice generators are being identified for serious action under GST and other laws including suspension of their GST registration based on the fact that whether their income tax payment commensurate with the expected profit margin on turnover reported by them in the GST returns.
The revenue department said that the notified income tax return for the current AY 2020-21 already requires reporting of GST outward supplies in the schedule GST.
Therefore, the information displayed in Form 26AS would provide ease of compliance with the taxpayers in filling schedule GST. There would be no change in the reporting requirement with the display of information on GST turnover in Form 26AS because the honest taxpayers are already furnishing GST returns and income tax returns and reporting their turnover correctly.
The department said that the display of information of GST turnover in Form 26AS, at the same time, would force dishonest taxpayers (who earlier used to evade income tax by under-reporting their turnover in the income tax returns as compared to turnover reported in the GST returns) to report they’re correct turnover and consequently force them to pay the correct income tax.
Also, it would ease the reporting of GST turnover in the GST schedule of the income tax return and should be seen as an important step in the direction of transparent taxation, the revenue department said.
The department further said that in order to provide ease of reporting to the taxpayers who have already filed GST returns, recently the information about the turnover reported in GST returns has also been displayed in Form 26AS. This would promote ease of compliance as the information regarding turnover reported in GST returns would be readily available to the taxpayers at the time of filing their income tax returns.
It may be noted that in order to facilitate voluntary compliance by taxpayers, the Finance Act, 2020 amended the provisions of the Income Tax Act, 1961, and expanded the scope of Form 26AS with effect from June 1, 2020.
Accordingly, a new Form 26AS was made available to the taxpayers. The new Form 26AS is the faceless hand-holding of the taxpayers to e-file their income tax returns quickly and correctly. The new form 26AS contains various information reported by the reporting entities in the statement of financial transactions such as information of cash deposit/withdrawal from saving bank accounts, sale/purchase of immovable property, time deposits, credit card payments, etc.