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November 11, 2020

Notice issued to TRAI by Telangana HC for alleged evasion of GST by television networks

by CA Shivam Jaiswal in GST

Notice issued to TRAI by Telangana HC for alleged evasion of GST by television networks

Government functions with the help of the taxes collected from the citizens.  Tax evasion is the major field, were Government revenue is lost.  On account of non-payment of taxes by tax evaders, Government stands to lose revenue. To avoid this exact scenario, the GST law has clearly defined descriptions of offenses and the penalties levied in each scenario.

GST law has defined 21 offences which attract penalty or prosecution. The list of such offences are as follows:

  • Supplying goods and/or services without issuing an invoice or issuing an incorrect or false invoice
  • Issuing an invoice without supplying goods and/or services
  • Collecting tax but failing to remit it to the government within 3 months of the due date
  • Collecting tax in contravention of law but failing to remit it to the government within three months of the due date
  • Failing to deduct tax or deposit the tax with the government
  • Failing to collect tax or collecting too little tax from the supplier at the time of payment, or failing to pay the tax to the government
  • Taking full or partial input tax credit without actual receipt of goods and/or services
  • Obtaining a refund of tax by fraud
  • Distributing an input tax credit other than in the manner prescribed
  • Falsifying or substituting financial records, producing fake accounts and/or documents, or furnishing a false return
  • Failing to obtain registration (if registration is required)
  • Furnishing false information during registration
  • Obstructing an officer from the discharge of duties
  • Transporting taxable goods without documents
  • Suppressing turnover leading to evasion of tax
  • Failing to maintain books of accounts and documents
  • Failing to furnish information to CGST/SGST officers or furnishing false information
  • Supplying and/or storing goods which one has reason to believe are liable for confiscation
  • Issuing an invoice or document by using the identification number of another person
  • Tampering with material evidence
  • Tampering with any goods that have been detained, seized, or attached

PIL filed in Telangana HC

A public interest litigation petition (PIL) was filed in Telangana High Court seeking the cancelling of licenses of cable television networks, direct-to-home (DTH) service providers, unencrypted satellite networks, internet protocol television (IPTV) providers and multi system operators (MSO’s) for allegedly violating provisions of the GST Act.

What was stated in the PIL? 

  • The PIL alleged that the Central tax authorities failed to collect GST from these networks who were evading the tax collected from the consumers since 2017.
  • In the Khammam town alone, the said television networks collected about Rs 1.44 crore GST from the subscribers since 2017 and were not paying the same to the tax department. 
  • The PIL was filed, seeking direction to cancel the services/licenses of various cable television networks, Direct-To-Home, unencrypted satellite network, Internet protocol television (IPTV) and multi system operators (MSOs) for allegedly carrying out business activities in violation of provisions of GST Act.
  • Petitioner N Rama Rao, a social worker from Khammam district, submitted that the said networks violated the provisions of GST Act by not registering themselves with an intention to evade the tax collection.
  • The secretaries to the Ministry of Information and Broadcasting and Ministry of Finance, Telecom Regulatory Authority of India, tax authorities concerned, and various cable operators are named as the respondents.
  • According to the information available under the Right to Information Act, most of the MSOs in Telangana were converting the tax collected from subscribers into black money. 

Notices issued by Telangana High Court (HC)

Telangana High Court issued notices to the Central government, Telecom Regulatory Authority of India (TRAI), and various cable television and internet service networks of the State to respond to the PIL complaining that the Central tax authorities have failed to collect the Goods and Services Tax (GST) from these networks since the year 2017. 

Though the issue was brought to the notice of the GST officials, no action was initiated. After hearing the case, the bench issued notices to the respondents to respond to the PIL and posted the matter to 3rd December, 2020.

The effective implementation of any tax law requires strict action against tax offenders. It is important to remember that, an offender not paying tax or making short payments must pay a penalty of tax evaded/short deducted etc., i.e., 100% penalty, subject to a minimum of Rs. 10,000. “Prevention is always better than cure.” Therefore, to avoid penalties or prosecution under GST, assessee’s should avoid the tax evasion route.

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