Errant sellers use loopholes, ask for cash to evade GST

NEW DELHI: A senior finance ministry officer, closely involved with the conceptualization and implementation of GST, recently went to one of the few remaining general stores in Khan Market. When he handed over his card for payment, the man at the counter advised him to pay cash as it will help him avoid paying tax.

A few metres away in Lok Nayak Bhawan, which houses several electrical shops, shopkeepers routinely advise you to pay in cash to avoid the 28% levy. It’s the same story at photo studios and other outlets even in this upmarket locality, barely a few kilometres from North Block that houses the finance ministry.

Prime Minister Narendra Modi may have said that GST is the tool to put an end to the system of kuchcha-pucca bills, but the system that has been put in place hasn’t delivered just yet. Officers blame loopholes in the system that are yet to be filled, after widespread criticism from traders and small businesses, who are blaming “cumbersome” processes for making their life difficult.


The officer who was advised to pay in cash says the government is waiting for things to settle down before it cracks down against tax evaders.

Last week, revenue secretary Hasmukh Adhia told TOI in an interview that this problem can only be fixed if the authorities can match GSTR 1, 2 and 3 (returns).

“Unfortunately, because of the compliance burden and demand for more time (from industry), we had to postpone the matching. Second, a foolproof system can only be put in place once we have nationwide E-way Bills to track movement of goods. People are just not ready for it and want it deferred. A lot of goods move without payment of taxes but with E-way Bill all will be reported,” he had said.

Recently, the GST Council decided to target mandatory E-way Bill only from next April, with states being encouraged to move to the new system over the next few months.

Some state finance ministers believe that the high levy on several common-use items, which are in the 28% bracket, is creating a scenario for evading taxes. “No one wants to pay taxes if the levy is very high,” said a minister.

But levies are not the only concern for several states, they have another headache to deal with as complaints of over-charging are rampant. Shops are levying GST over and above the maximum retail price (MRP), something that has now prompted the Centre to take up and communicate to the consumer.

So, many consumers have to shell out Rs 47 or 48 for a tube of toothpaste where MRP is Rs 40 but retailers are charging 18% tax above the ceiling price.

“While it is clear that MRP is inclusive of GST, there may be some retailers who are taking advantage of lack of knowledge of consumers by charging GST over and above MRP. This can be countered by creating more awareness and putting mandatory boards in all retail outlets,” said MS Mani, partner at consulting firm Deloitte.

While the government had asked companies to reprint the price and threatened to prosecute those found violating the rule, the move is tough to implement, say state government officers.