MUMBAI: In what could lead to complications in tax-evasion probes, both central and state officials are now empowered to investigate companies on goods and services tax (GST) liabilities and claims, and take action against erring entities without bothering about jurisdiction.
The Central Board of Excise and Customs (CBEC) last week asked central tax officers to initiate action if they detected tax evasion based on intelligence inputs even in companies that fall under state tax administrations.
The circular comes about a month after Andhra Pradesh chief commissioner of state taxes issued a similar circular. The AP circular asked state tax officers to initiate action based on intelligence inputs even on companies that fall under the central tax administration.
“Intelligence-based audits by the central government for taxpayers under the state government jurisdiction may bring back the industry fear of dual adjudication and control under GST. The industry would, in general, prefer only a single administration and control in letter and spirit,” said Abhishek Jain, Partner, EY.
Last year, the GST Council had divided the responsibilities between state and central tax authorities. The state tax authorities administered 90 percent of the small taxpayers with an annual turnover of less than Rs 1.5 crore and 50 percent of larger taxpayers above revenues of Rs 1.5 crore. The central tax authorities administered 10 percent of companies under Rs 1.5 crore turnover and 50 percent of the companies with revenues of above Rs 1.5 crore.
Insiders say that the issue was triggered after some companies were found evading some part of GST. Some companies were found to be evading the State Goods and Service Tax (SGST) and were only paying Central Goods and Service Tax (CSGT). The circular issued by AP said that while the department has been conducting audit of tax payers under state tax administration, the tax payers under central tax administration were left unattended.
And the state was losing on SGST dues from the businesses under the central tax administration.
Tax experts say that while investigations would mean more tax revenues for both the centre and states, they would lead to problems for companies.
“Imagine a company that has more than two state registrations. There could be situations where one state is taking one stand while another state could take an exactly contradictory stance,” said a tax expert. Industry trackers point out that many state tax officers would be taking a hard stand as they would start losing on revenue.
Unlike the earlier tax regime, GST is a consumption-based tax. This means that the tax has to be paid in the state where the consumer is based. GST, say industry trackers, would lead to a situation where some states that yielded benefits merely by offering sops to companies will lose out on indirect tax revenues.
On the other hand, some of the poorer states (as they collected lesser taxes earlier) would generate more revenue under the GST.
Tax experts believe that richer states, such as AP, Tamil Nadu, Maharashtra and Gujarat, may get aggressive as they anticipate a fall in their indirect-tax collections.
Source- Economic Times.