India to put more scrutiny on ‘high-risk’ taxpayers
India’s Finance Ministry should target high-risk taxpayers within the GST composition scheme to ensure they verify declared sales figures using additional sources, including third-party data, to prevent tax evasion.
The country’s Comptroller and Auditor General (CAG) said that after studying a wide selection of composition taxpayers under central jurisdiction during the 2019-20 to 2021-22 period it found that many GST taxpayers are at significant risk of exceeding the turnover threshold for the composition levy scheme (CLS).
These high-risk taxpayers were identified through audits using data from GST returns, along with information from third-party sources such IT returns.
The GST composition scheme is available to taxpayers whose aggregate turnover in the preceding financial year did not exceed R15 million ($180,000). For taxpayers in special category states, this limit is R7.5 million ($90,000).
The CAG highlighted two major risk areas for CLS taxpayers: the under-declaration of ‘value of outward supply’ to remain eligible for the scheme and the failure to meet the eligibility conditions for availing CLS benefits.
The audit also found instances where certain CLS taxpayers continued to participate in the scheme despite not meeting the prescribed eligibility criteria, and many CLS taxpayers were not fulfilling their obligations to file returns and pay taxes under the reverse charge mechanism.
“The Ministry should identify high risk taxpayers in the CLS on a periodical basis using a risk-based approach and verify their declared value of outward supply from other sources including third parties to minimize the possibility of misuse by ineligible persons,” the CAG said in a report tabled in Parliament.
The official auditor also recommended that the Finance Ministry establish a system to identify ineligible taxpayers and take steps to remove them from the CLS, ensuring that the scheme’s intended benefits are not misused.
‘India needs to upskill workforce’
India should invest in creating a skilled workforce, build better, more sophisticated infrastructure while undertaking land, labour and taxation reforms if it wants to become a developed country by 2047, according to International Monetary Fund (IMF) deputy managing director Gita Gopinath.
Speaking at the Diamond Jubilee celebrations of the Delhi School of Economics, Gopinath outlined what India needs to do in the medium term to reach its goal of becoming a developed country by 2047
“It is a tremendous aspiration to become a developed country… India needs a workforce which is much more skilled and has a much higher level of education. There is a skill mismatch in the workforce,” Gopinath said.
“India has grown well in terms of its overall growth rate, and at 7%, it is the fastest growing major economy in the world.
“The question is, how does one keep up the momentum and raise it further so that you can increase per capita incomes in India to get to being an advanced economy,” she said.
Gopinath said India needs to broaden its tax base and make sure there are not many leakages.
“India should make sure that it gets enough from the long-term capital gains tax. More can be done on the property tax front as well,” she added.
She also called for expanding the base of personal income tax and goods and services tax while simplifying their structures.
Gopinath also said that keeping trade open was important; the country needs to reduce import tariffs if it wants to be an important player in the global supply chains, she said.
“Tariff rates in India are higher than in its other peer economies. If it wants to be an important player on the world stage and an important part of global supply chains, it is going to require reducing those tariffs,” the economist said.
She also listed the need to strengthen institutions to improve ease of doing business, have efficient judicial systems, put in place better regulatory environments and ensure women safety.
