Government Considers Technology-Based Risk Profiling to Combat ₹4 Lakh Crore GST Evasion
The Indian government is exploring the use of technology-based risk profiling to tackle the issue of Goods and Services Tax (GST) evasion, which has amounted to over ₹4 lakh crore in just four years. Two officials revealed that the government is considering more advanced risk profiling methods using artificial intelligence (AI) and data analytics to preempt tax credit frauds and block suspicious claims until they undergo thorough scrutiny.
While AI and data analytics have proven effective in detecting tax credit frauds, the recovery process has been slow and hindered by time-consuming legal obstacles. To address this, the government is contemplating the implementation of a system that would identify potential frauds early on and hold their claims until physical verification is conducted. By doing so, they aim to combat the use of counterfeit invoices by fraudsters who manipulate tax credit benefits without actual supplies of goods and services.
According to official data, GST evasions worth ₹2,54,235 crore have been detected in the last three financial years, with only 27.7% or ₹70,617 crore recovered so far. A total of 992 individuals have been arrested in connection with these frauds. The magnitude of the issue was highlighted in a recent parliamentary discussion when Member of Parliament Sushil Kumar Modi revealed that ₹1.51 lakh crore worth of GST evasion had been detected in the current financial year alone, and the total evasion amount from 2019-20 onwards could be around ₹4.46 lakh crore.
Modi emphasized that fraudulent claims were not only a concern for the government but also for genuine taxpayers whose legitimate claims are denied due to the accrual of credits from fraudulent sources. He suggested the establishment of a robust risk profiling system to preemptively identify likely suspects and subject them to comprehensive physical scrutiny before granting them registration.
Finance Minister Nirmala Sitharaman, in response to these concerns, assured the parliament that the GST Council had extensively discussed the issue and had taken steps to address it in the past. She confirmed that risk profiling before granting tax credit and restricting claims were ongoing topics of discussion within the Council. However, specific details regarding the proposed technology-based risk profiling system were not provided.
The news of the government considering technology-based risk profiling to combat GST evasion has raised hopes among taxpayers and industry stakeholders. It is believed that such a system could help prevent frauds at an early stage and ensure greater transparency in the GST regime. However, the implementation and effectiveness of the proposed measures remain to be seen.
The Union finance ministry, the department of revenue, and the Central Board of Indirect Taxes & Customs (CBIC) did not provide any response when queried about the matter. The GST Council, chaired by the finance minister and including state finance ministers as members, serves as the authority for decision-making related to GST. The council holds the power to shape policies and take necessary actions to address issues such as tax evasion.
As the government aims to curb GST evasion and recover the substantial amount of outstanding tax, the proposal for technology-based risk profiling indicates a step towards a more proactive and efficient approach. With advancements in AI and data analytics, it is hoped that the implementation of such a system will contribute to curbing fraudulent activities and ensuring a fair and effective taxation system in the country.
References:
– [Government Considers Technology-Based Risk Profiling to Combat ₹4 Lakh Crore GST Evasion](insert link)
– [Central Goods and Services Tax (Second Amendment) Bill, 2023](insert link)
