Hyderabad: Nearly eight months after the introduction of the Goods & Services Tax (GST) in July 2017, the Centre and state governments are tightening the noose around GST defaulters.
Neither raids nor any stringent action was initiated against defaulters in these eight months as it was felt that adequate time should be given for tax payers during the transition period from VAT to GST.
Of late, GST raids have increased in the state, especially on film and real estate sectors, where there are complaints of huge tax evasion. IAS and IRS officers have been authorised to carry out raids under the provisions of the GST Act.
The state GST department and the Central GST department are both empowered to carry out the raids, check vehicles or take action against a trader on suspicion of tax evasion, regardless of the department under which the trader is registered. The department taking action, however, will have to coordinate with the department under which the firm is registered.
The GST Council has issued a notification in this regard defining the area of jurisdiction of the SGST and CGST departments. There had been no clarity about who has the power to carry out raids and vehicle checks.
In the VAT Act regime, the trader was under the ambit of the commercial taxes or Central excise department depending on his turnover and type of tax. GST ushered in a new formula under which 90 per cent of traders — those who have an annual turnover of less than '1.50 crore — will come under the jurisdiction of SGST department, while the rest are under the CGST.
It was found that film producers and builders in the state are deducting GST at source but not paying the same to government. GST officials are learnt to have conducted secret raids on film producers recently.
A top producer was found to have evaded taxes of '7 crore. He was summoned under Section 70 of the GST Act. He allegedly confessed to evasion and paid '2 crore on the spot and sought time till March first week to repay the balance '5 crore.
Evasion of tax amounting to '5 crore or more is a cognisable offence. In such cases, 100 per cent penalty and 18 per cent interest will be imposed. Defaulters can be imprisoned for a period of up to five years.
VAT arrears of Rs 4K cr haunts TS
The TS government was for long being haunted by VAT arrears of defaulters amounting nearly '4,000 crore and repeated efforts to recover the dues after GST came into force from July 2017 proved futile.
The state government was against making a fresh attempt to recover dues. It asked the commercial taxes department to categorise defaulters into two groups.
The first would be of those arrears which could be recovered by holding negotiations or offering one-time settlement schemes and the other those which could be recovered by initiating legal action and attaching properties.
Major defaulters were found to be dealers engaged in trading of steel, oil, rice and marbles.
There were also huge arrears from builders who constructed apartments and villas but evaded payment of advance tax. The government engaged the services of 300 auditors to visit the dealers/traders and take up fresh auditing to determine which arrears could be recovered without legal disputes and which were not.
Each auditor was assigned the responsibility of looking into the accounts of at least 30 traders/firms by June 15.
The government engaged professional auditors after there were complaints against commercial taxes department staff earlier that they were demanding bribes and colluding with defaulters and helping them to evade taxes.
It even amended the VAT Act in the Assembly session last year, empowering officials to inspect records dating back to six years from four to detect tax evasion.
The amended Act allowed officials to take up any investigation, inquiry, verification, including scrutiny and audit, assessment proceedings, adjudication and any other legal proceedings for recovery of arrears.
The government had been strengthening VAT Act even after GST came into force in July 2017, eyeing recovery of arrears.
