Authorities plan to crack down on small restaurants and B2C companies after customers using a phone app complained that the businesses were charging GST but not depositing the tax with the government.
The app called Iris Peridot allows people to scan unique GST Identification Number (GSTIN) of a business and find out if it had filed returns.
Businesses with an annual turnover of up to Rs 1.50 crore can opt for the GST composition scheme and file returns quarterly. Under the composition scheme, traders and manufacturers pay 1 per cent GST on their turnover, while restaurants and service providers pay 5 per cent and 6 per cent taxes respectively.
However, businesses using the scheme cannot to charge GST from consumers.
"We have received several complaints from consumers with regard to charging of GST by entities who have not been filing returns. Some customers have also flagged the issue of charging of GST by small local restaurants who otherwise would be under the composition scheme," an official told PTI.
As the number of complaints is very large, the tax department is developing a mechanism to find out the quantum of possible tax evasion and refer them to field offices for follow-up actions.
"In absence of sufficient manpower to deal with such huge number of complaints with relatively small tax implication, it has become an administrative nightmare for the department," the official said, adding similar complaints have also started coming in against small B2C entities dealing in hardware, sanitary ware, furniture, electrical goods.
PwC India Partner and Leader (Indirect Tax) Pratik Jain said tax evasion at B2C level remains a big concern for the government.
"To achieve over 20 per cent projected growth in GST collection in current fiscal, it's important that evasion in B2C segment significantly reduces. Governments across the globe are trying to find ways to incentivise consumers to help in creating a more compliant eco-system, which we need to explore as well. Also the tax policy should be aligned to check tax evasion," Jain said.
Jain further said restricting input credits for restaurants and real estate sector may disincentivise the businesses to come in the tax chain and such policies need to be carefully reviewed.
EY Tax Partner Abhishek Jain said "with a significant growth in GST collections envisaged in this Financial Year, the focus of the government would be to plug GST leakages".
For 2019-20, the government proposes to collect Rs 6.10 lakh crore from Central GST and Rs 1.01 lakh crore as compensation cess. The Integrated GST balance has been pegged at Rs 50,000 crore.
The Central GST collection in 2018-19 fiscal was Rs 4.25 lakh crore, while compensation cess was over Rs 97,000 crore.