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December 18, 2020

A vegetable seller of Rourkela served GST notice for Rs 110 crore for tax evasion

by CA Shivam Jaiswal in GST

A vegetable seller of Rourkela served GST notice for Rs 110 crore for tax evasion

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. For the past 6-7 months the COVID 19 pandemic had forced India into a lockdown. Most of the countries small businesses which relied on physical availability of customers have had the most hit. Small business revenues have plunged everywhere.

Nevertheless, tax evaders have proved to be an exception to this rule, who no matter what the situation persists, find a way to evade tax. It is not only the Government who loses revenue due to tax evasion, but sometimes the common man also falls prey to certain tax evaders.

A vegetable seller of Rourkela has fallen prey to GST fraud as a notice for Rs 110 crore tax evasion has been served to him. Kartik Kamila, who runs a small vegetable shop, was taken aback after getting the notice. He has been fraudulently represented as the owner of a market complex at Koelnagar in the steel city by the Lingaraj Trading company.

This apart, an amount of Rs 10 crore has allegedly been misappropriated as input tax credit through fake bank accounts. Kamila suspected that someone might have committed the offence using his electricity bills. Earlier, several students, housewives, owners of small eateries, labourers, and auto-rickshaw drivers in Rourkela were also victimised in similar ways by the scamsters.

Input Tax Credit (ITC) basically means reducing the taxes paid on inputs from taxes to be paid on output. When any supply of services or goods is supplied to a taxable person, the GST charged is known as Input Tax.

According to Section 16(1) of the CGST Act, every registered taxable person shall, subject to such conditions and restrictions as may be prescribed and within the time and manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

According to Section 132(1), Whoever commits any of the following offences, namely:

  1. supplies any goods, services or both without issue of any invoice, with the intention to evade tax
  2. issues any invoice or bill without supply of goods, services or both leading to wrongful availment/utilisation of ITC or refund of tax;
  3. avails ITC using such invoice or bill referred to in clause (b)
  4. collects any amount as tax but fails to pay the same to the Government beyond 3 months from the date on which such payment becomes due
  5. evades tax, fraudulently avails ITC or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d)
  6. falsifies/substitutes financial records or produces fake accounts/documents or furnishes any false information with an intention to evade payment of tax due
  7. obstructs or prevents any officer in the discharge of his duties
  8. acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation
  9. receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions
  10. tampers with or destroys any material evidence or documents
  11. fails to supply any information which he is required to supply or supplies false information
  12. attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section

Shall be punishable as follows:

Quantum of OffencePunishment
cases where the amount of tax evaded or the amount of ITC wrongly availed or utilised or the amount of refund wrongly taken exceeds Rs 500 lakhimprisonment for a term which may extend to 5 years and with fine
cases where the amount of tax evaded or the amount of ITC wrongly availed or utilised or the amount of refund wrongly taken exceeds Rs 200 lakh but does not exceed Rs 500 lakhimprisonment for a term which may extend to 3 years and with fine
case of any other offence where the amount of tax evaded or the amount of ITC wrongly availed or utilised or the amount of refund wrongly taken exceeds Rs 100 lakh but does not exceed Rs 200 lakhimprisonment for a term which may extend to 1 year and with fine
cases where he commits or abets the commission of an offence specified in clause (f) or clause (g) or clause (j)imprisonment for a term which may extend to 6 months or with fine or with both

GST follows a system of levying tax at each stage of the value addition in the industry. By relying heavily on technology, GST mechanism has made it easier for the authorities to profile tax payers based on their compliance track record. Fraudulent claiming of ITC has always been a complicated issue with officials trying to make sure fraudulent claims are not granted, while businesses claim that delays in ITC processing affects their liquidity. Claiming ITC fraudulently has sadly been a common practice of tax evasion in the industry.

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