With implementation of Goods and Services Tax (GST) requiring a fundamental change in the way Commercial Tax Department functions, the Tamil Nadu government has prescribed a new approach with elaborate procedures in enforcing tax laws.
The emphasis is on intelligence-based enforcement activities in an unobtrusive and efficient manner under proper authorisation and overall supervision and control of the Commissioner. The need for the change is to avoid indiscriminate investigation and to avoid any disrepute to the Department. The new approach took effect on June 1, according to a 19-page circular issued by TV Somanathan, Commissioner of Commercial Taxes.
The Enforcement Wing is being renamed as Intelligence Wing with focus on tax evaders on the basis of reports prepared with diligence from relevant data and information gathered in a scientific manner, and without resorting to widespread or random inspection without adequate data.
Hitherto, the Department relied on physical interception of goods. This approach can no longer continue in the same manner with the removal of inter-State movement controls and check posts.
Roving squads
On roving squads, there were instances where officers levied maximum penalty even for minor breach of tax regulations and procedural requirements. To avoid this, vehicle checks will be conducted only at places ordered by Joint Commissioners and during hours of duty prescribed for the concerned squad. No e-Way bill is required for commodities or circumstances specified in sub-rule (14) of Rule 138, and in such cases vehicles shall not be detained, the circular says.
Potential areas for tax evasion include non-disclosure or suppression of purchases made from unorganised sector and showing lower turnover with meagre profit than the actuals to avoid tax. Consumers in B2C transactions do not insist for proper invoices, if they are not charged with tax. The taxpayer issues an estimation slip in a paper as a proof of having sold the goods. The input tax credit (ITC) accrued in respect of the goods would be transferred to another taxpayer through an invoice to make the other taxpayer claim ITC for certain percentage of commission without actual sale of goods, the circular said.
GST revenue
Tamil Nadu earned GST revenue of ₹36,330 crore in 2018-19 with evasion pegged at around ₹600 crore since GST implementation in July 2017, said industry sources.
K Vaitheeswaran, Advocate and an expert on GST, reacting to the Commercial Tax Department circular said that it is a welcome step but what is worrying is that some of the items listed for potential scrutiny is very wide and general. This may open an era of inspections and audits of routine and bonafide transactions. For example outstanding ITC balance in excess of ₹25 lakh with no appreciable corresponding output tax payment is a parametre for conducting inspection or audit. There is no one-to-one correlation in ITC and accumulation could be due expansion ,sluggish demand and many other business reasons.
