50,000 cases to be taken up for GST audit in FY24, says CBIC chairman

Authority's target to be based on risk parameters

The indirect tax administration has shortlisted 50,000 fresh cases that will be taken up for goods and services tax (GST) auditing in the current financial year as part of efforts to increase compliance and widen the tax base, Central Board of Indirect Taxes and Customs (CBIC) Chairman Vivek Johri said in an interview at his office here.

“We did about 30,000 GST audits (in 2022-23) pertaining to FY21 and FY22 at the central level. We detected tax evasion worth about Rs 17,000 crore at the end of the financial year 2022-23, and have made recoveries of about 18 per cent or Rs 3,060 crore so far,” the CBIC chief said. The recovery figure is likely to increase as there are “some spillovers which we are expected to conclude in the ongoing financial year”, he added.

For FY24, the authority’s target to audit 50,000 cases is based on risk parameters. There will be spillovers from earlier years too, he clarified.

GST audits or departmental audits are done to verify declared sales, taxes paid, refunds claimed, and input tax credits availed of by looking at tax returns and other records maintained by businesses. Any mismatch in information across different documents could raise a red flag.

Departmental GST audits picked up momentum in FY23, after businesses were given adequate time to adapt to the indirect tax regime rolled out in 2017. 

About the recently launched two-month special drive on May 15, Johri said it is meant to clean up the taxpayer base. “We have shortlisted 30,000 cases for physical verification, of which, so far, 35 per cent or over 10,000 cases have been found to be allegedly involved in the generating fake registration to claim bogus input tax credit (ITC). So far, the department has detected about Rs 7,000 crore of bogus ITC during the drive.”

“It is a concerted action with states meant to identify those taxpayers who on the basis of their behaviour and their footprint appear to be suspicious. First, we have generated a list of such taxpayers who appear to be very high-risk; all these taxpayers will be verified physically, just to ensure that they actually have a place of business. There are some protocols that we've laid down with states for verification. In case of non-existent entities, we are taking action to suspend registration and cancel it, or even block input tax credit,” he said.

Johri said the department has been able to track users of ITC -- layers of recipients who are actual beneficiaries of the tax credit -- and it is accordingly taking action if there is any irregularity.

Cracking the whip

• In FY23, GST audit detected tax evasion of Rs 17,000 crore, made recoveries of Rs 3,060 crore
• Two-month special drive with states has led to detection of Rs 7,000 crore worth of fake input tax credit so far  
• Special drive, launched on May 15, to continue till July 15

About the GST mop-up surpassing Rs 18 trillion in FY23, the CBIC chairman said that this was due to an improved economy and uptick in compliance (return filing), which is currently 85 per cent against 60-70 per cent in the pre-GST era.

Johri expects the average monthly GST collection to be in the range of Rs 1.55 trillion-Rs 1.6 trillion in the current financial year. “I would like to be conservative in our revenue estimates, so I think Rs 1.5 trillion monthly average is achievable. This is keeping mind the real economic growth, good IIP numbers, and overall growth estimation by various institutions.”

On the department's strategy for widening the tax base and preventing misuses, he said that the authority will ensure tighter verification at the time of registration of businesses to curb misuse. At the same time, it will also boost its compliance management efforts by doing tighter scrutiny and audits with the help of states.

Sector-wise, he said, some sectors have been a cause of concern regarding increased numbers of bogus bills as they mostly deal with informal chains. These include metal and plastic scraps, waste paper, manpower supply services, and advertising services.

About setting up the GST tribunal, the CBIC chief said an amendment has been already carried out in the Central GST Act through the Finance Act, 2023. But the State GST Act also needs amendment. “So states will now take the matter, depending on their Budget sessions; some will do it now. Typically, what happens is that when changes are announced in the GST law, state governments are able to complete them by October or November of the year. I expect that it will be operational in the second half of the current financial year,” he added.