There is a couplet by an unknown poet – Love doubled for a huge lover, the disease increased as the medicine was taken. This is what has happened in India with the indirect tax reform law, Goods and Services Tax i.e. GST, which was started with great fanfare by calling the Parliament at midnight. As the law is becoming outdated, tax evasion is also increasing. It is worth noting that just as independence was declared at midnight, in the same way in July 2017, the Narendra Modi government had called the Parliament at midnight and announced the implementation of the GST law.
This law was presented as the only solution to all the irregularities related to indirect tax. The Center worked hard to convince all the states to give up their right to collect taxes and let the Center do this work. It was said that this is a system of ‘one country, one tax’ but in reality it is an extension of the old system of one country, many taxes. That is a different issue. The problems faced by businessmen are also a big issue. But if we talk only about tax evasion, then there is no hesitation in saying that the purpose for which this law was implemented is not being fulfilled.
According to the report of DGGI i.e. Directorate General of GST Intelligence, an organization of the Government of India, GST evasion in the financial year 2023-24 has been more than Rs 2 lakh crore. According to another report, if evasion is added to Central GST, then tax evasion for the financial year 2023-24 will reach Rs 2.37 lakh crore. That is, if the government collects GST of Rs 20 lakh crore in a year, then tax evasion is equal to 12 percent of it! How big this figure is can be estimated from the fact that the annual budget of a huge state like Bihar is Rs 2.62 lakh crore. That means GST almost equal to Bihar’s budget has been stolen.
The budget of the Government of India is Rs 40 lakh crore. GST evasion is equal to about six percent of that. Such huge tax evasion is taking place and despite the government knowing about it, it is not able to do anything! Instead of stopping theft, the government is struggling to find ways to increase recovery. Then, when there was a meeting of the Group of Ministers formed to rationalize GST, the decisions taken in it were told that due to this the government will get additional tax of Rs 10,000 crore. That means all measures are being taken only to collect additional tax.
It is not that only private or fake companies are involved in GST evasion. Government companies are also evading or hiding taxes. A big company like Life Insurance Corporation of India Limited has received many notices of tax evasion in the last one year. Apart from insurance companies, e-commerce companies, IT sector companies, online gaming companies, companies selling pan masala and gutkha, cigarettes, all are involved in tax evasion. Online gaming companies alone have evaded tax worth more than Rs 1 lakh 10 thousand crore in one year.
Banking, Financial Services and Insurance i.e. BFSI is the most organized sector in India. This sector ranks second in GST evasion. Think, in the financial sector of the country, which is currently the fastest growing sector along with IT and whose complete information about its clients is with the companies in the sector, is such a huge amount of tax evasion taking place?
Despite setting up such a huge network and making such huge fanfare, it is not very difficult to understand how tax evasion is taking place. Just as tax evasion used to happen in the old system, similarly it is happening in this system also. Companies are collecting input tax credit from the government by creating fake invoices. For this, fake companies are being set up by stealing people’s Aadhar cards and fake invoices are being made in the name of those companies. Companies related to digital and e-commerce are not registering in India, they are working only on foreign registration.
Similarly, services provided through online platforms are being wrongly classified and their tax slab is being reduced. Online gaming companies are running lottery games like gambling but they are being presented as skill-based games, which is leading to maximum tax evasion. The maximum tax evasion of Rs 1 lakh 10 thousand crore has happened in this sector. After that there is BFSI sector, in which tax evasion took place. Apart from this, there is a lot of tax evasion in the works received through government tender or in the sale of electronic goods or cigarettes, paan, gutkha, tobacco etc.
The question is that when the government made the entire GST system online and made a system of digital monitoring, then what is the point of all that if tax evasion is not being stopped? GST evasion doubled in 2023-24 compared to financial year 2022-23. So shouldn’t this wake up the government? But what the government is doing is issuing show cause notices, which are having no effect. In the financial year ending March this year, about 2400 show cause notices were issued for tax evasion of Rs 1.64 lakh crore.
Through these, tax evaders were offered a one-time voluntary tax payment to settle the matter. Still, only about Rs 13 thousand crore could be recovered. About 150 people involved in tax evasion and beneficiaries were arrested but to no avail as no case proceeded and many people obtained a stay on the proceedings from the higher courts. Think, can there be any other sector in which more than Rs 2 lakh crore is stolen in a year and the government is unable to do anything?
Last financial year, an average of Rs 1.68 lakh crore GST was collected every month. This means that much more tax is stolen in a year than the government collects in a month. What is the benefit of such a system? The common man is troubled by paying GST. Unnecessary burden has been placed on him. Good and honest businessmen are worried because there is a provision in this law that as soon as the bill is generated, that is, as soon as the bill is prepared and sent to someone for payment, the GST applicable on it has to be deposited.
An honest businessman deposits GST as soon as he prepares the bill, but there is no guarantee that the bill will be paid on time. His GST money remains stuck for months and years and is not paid. So, on one hand, both the common man and honest businessmen are worried, while on the other hand, tax evaders are having fun. They are doubling the amount of tax evasion every year and the entire government system is not able to do anything.