Non-filing GST returns grow faster than the tax base

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The number of filers who failed to file returns increased over the 17 months of GST implementation until November 2018, according to a response from the Ministry of Finance to Lok Sabha.

While the number of people required to file monthly returns increased 32 percent from July 2017 to about 98.5 lakh in November 2018, the number of people not filing these returns increased by 167 percent over the same period last year. this period, according to the latest data from the goods and services tax.

The data also show that this is not only the case for monthly filers, but also for those who use the composition scheme, which allows the production of quarterly returns.

While the number of people reporting quarterly increased by about 55% from July 2017, it rose to 17.74 lakh in November 2018, but the number of people who did not further generated returns has increased about 162% during this period.

In other words, the number of people who do not file returns has increased faster than the tax base for common filers and filers by composition.

Tax analysts say the reasons are varied, including some taxpayers with too low turnover, and others who register on the GST only because of the insistence of their big customers, while others are simply discouraged by the filing process.

"While the increase in the proportion of non-filers is a concern, it should be kept in mind that many GST registrants may have zero or low turnover and others may have taken a registration. at the request of their customers, "MS Mani, a partner at Deloitte India, said. "Some of the initial challenges faced by small businesses on the GST portal may have also deterred some of them from trying to file returns online."

However, other tax analysts point to a more serious situation in which small businesses systematically and fraudulently avoid taxes in the hope that they are too small to be noticed by the tax collector.

"What happens is that a lot of small suppliers access the system because their big customers force them, because the client can only claim input tax credits if their supplies come from a supplier registered with the system. TPS ", analyzes the tax expert with a major consultant. told L & # 39; Hindu under condition of anonymity.

"However, these small sellers are trying to fly below the tax radar. They charge the GST rate on their supplies, but then keep that margin as a profit margin instead of paying the tax to the government. "

These providers base these activities on the fact that the tax collector will take 2 to 3 years to notice, because the matching of invoices is still not activated on the GST portal, the analyst added.

"By the time they get noticed, the provider has already changed its name and GST number and continues to operate," said the analyst.

"The government loses"

"They have been doing it for 15 years under VAT and are just transferring this practice to the GST. The government loses because it has to pay ITC to big business and does not even get tax revenues from small suppliers. "

Another analyst explained that in reality, a relatively small number of taxpayers were below the threshold of ¤ 20 per lakh for filing returns.

"An annual income of 20,000 rupees is equivalent to about 5,500 rand a day," explained the analyst. "Even your local grocery store or kirana would do more business than that in a day. They simply do not make their statements because they are afraid to get the attention of the tax collector. "