Government banks on 2 tools to crack whip on GST evaders

NEW DELHI:The government is hoping to raise its goods and services tax (GST) collections by almost 25% by cracking the whip on evaders from April by reintroducing the reverse charge mechanism that will help it track transactions. The “anti-evasion” measure will be in addition to electronic-way bills that will become mandatory from next month.

“We are slowly tightening the noose and these two steps alone will help us increase our collections by around 25%,” said a senior government official.

Usually, a goods seller or a service provider is liable to pay tax. But under reverse charge, the receiver has to pay tax and the chargeability gets reversed. Under GST, the move was introduced for small suppliers who may be unregistered, and tax paid was eligible for input tax credit. But under protest from traders, the government suspended the move till March 31.


The suspension of reverse charge and invoice matching as well as a deferred rollout of e-way bills are seen to be responsible for pulling down the GST mop-up to Rs 81,000 crore in November, something that finance minister Arun Jaitley acknowledged on Thursday. “So far, it was voluntary compliance without anti-evasion measures. It is important to build anti-evasion measures and eway bill is an important antievasion measure...collections will pick up,” he said.

While e-way bills are now operational on a trial basis in several states, the ministers said, from February, at least 15 states will use the tool to track even intrastate movement of goods — something that was to become mandatory from June.

Tax collections were reviewed by the GST Council on Thursday and Jaitley suggested that there was massive evasion through the composition scheme for small traders that came with a flat tax liability and low compliance. He said during July-September, 17 lakh registered dealers paid Rs 307 crore via the window, which pointed to an annual turnover of under Rs 20 lakh, the minimum requirement for registering under GST.

The finance minister threatened to amend the law and said there were suggestions to use the reverse charge mechanism to plug loopholes. Officials said that over 40 recommendations of the law review committee were also accepted in-principle and amendments will be moved during the second half of the Budget session, after consultations with states were over.