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July 25, 2023

I-T Lens on Using Multiple PAN Cards for Big Purchases and Wedding

I-T Lens on Using Multiple PAN Cards for Big Purchases and Wedding

Tax experts and business insiders predict that scrutiny of “high-value consumption expenditure” in industries including hotels, banquets, luxury shops, and designer goods would increase this year, citing the primary action plan of the primary Board of Direct Taxes for fiscal 2023–24.

Any sale or purchase of goods or services for more than Rs. 2 lakh in cash must be registered by the seller on form SFT-013. According to the board’s plan, which has been discussed in business circles and has been posted on several tax sites, such transactions need to be rigorously reviewed because it has seen widespread circumvention of this rule.

Transactions of Rs. 2 lakh must be registered using SFT-013.

Industry insiders have access to a document that states that high-value consumption expenses must be compared to taxpayer information already on file with the department. As a result, it is critical to pinpoint any potential sources of circumvention, such as hotels, banquet halls, luxury brand retailers, designer clothing stores, and IVF clinics. In the document, it is stated that “Such sources will have to be identified and a verification exercise could be conducted by calling for information in a non-intrusive manner.”

Sales and purchases of goods or services worth Rs. 2 lakh will be scrutinised; some customers split the bill to avoid disclosing tax information, according to a luxury brand merchant.

“Given that the IT and related service sectors are negatively impacted post-Covid in light of numerous local and international developments, the government is trying to leave no stone unturned in expanding the taxpayers’ base by utilising the sectors that have seen unprecedented boom and super profits the extraordinary pandemic situation on account of heavy spend (termed widely as revenge spending) as a one-time opportunity,” said Rahul Garg, managing partner of tax and reorganisation. “While the individual spenders would have to be more cautious in their tax filings now, these Sectors would need to be prepared for a greater scrutiny both in terms of corporate tax or withholding tax perspective and the need for strong documentation in place,” he continued.

According to a hotelier familiar with the developments, scrutiny of hotels and banquets has already increased in the past year and is certain to intensify. “This move will have an impact on weddings and other large social events where PAN (permanent account number) details are shared among families on high-value transactions.”

Verification of high-value consumption expenses with taxpayer information

The tax department is taking a “pragmatic and smart” approach, according to Amit Maheshwari, managing partner of Ashok Maheshwary & Co. By analysing various data sources pertaining to high-value expenditures, the difference between the reported incomes and the said expenditures incurred by the taxpayer can be easily detected.

According to a top executive of a luxury bag company, customers occasionally ask them to divide the bill when making multiple-item purchases worth more than Rs. 2 lakh in order to keep the tax information private.”Mall owners are also aware of every single item on the market with a price over Rs. 2 lakh.” Since they have a revenue sharing arrangement, mall operators are informed whenever such a product is sold, he continued.

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