Letter to BS: Slowdown in tax collection is not because of evasion

Government-owned companies which manufacture a very large amount of goods and services do not evade

CAG said tax collections under the GST slowed down in the first year of its roll out

This refers to “2 years after roll-out, GST glitches still exist, says CAG report” (July 31). The Comptroller and Auditor General of India (CAG) in his report on GST for 2017-18, which was tabled in the Parliament on Tuesday, pointed out that “the invoice matching system has not kicked-in”. The CAG also said, “Invoice matching is a critical requirement that would yield full benefit of this major tax reform”. The report’s indirect implication that a slowdown in tax collection is because of not matching 100 per cent of invoices, isn’t correct. Such an imputation is based on the presumption that evasion is taking place because of not matching. The reason why it is not correct is that an overwhelmingly large percentage of tax payers are not evaders. Government-owned companies which manufacture a very large amount of goods and services do not evade. Large companies having excellent reputation and big service sector companies (such as Tata, Mahindra and Mahindra and Infosys etc) do not evade either. 

There is already a huge audit system which conducts auditing with the help of computer system installed in the department. Training from Canadian Government for systemic auditing has also been very effective. Then there is an anti-evasion organisation looking into the evasion aspect of companies prone to it. They depend on collecting intelligence. Matching of raw materials with the final production of goods is conducted by the audit parties of individual manufacturers. So the slowdown in the collection of revenue is not because of evasion. A 100 per cent matching of invoice is never done in any country. They all depend on audit and intelligence gathered by the department concerned. So the CAG could better advice that the whole idea of 100 per cent invoice matching should be given up straightaway. As an ex-insider having knowledge about invoice matching, also having experience derived from other countries, I can definitely say that attempt to match 100 per cent invoices should be given up immediately. It will never succeed. Nobody is willing to say so but that is a fact. Matching should be done only for suspected companies. GST is an amalgamation of central excise, service tax and state VAT. Since for all these three taxes no 100 per cent of matching of invoice was being done, there is no logic in introducing 100 per cent matching for GST.

Sukumar Mukhopadhyay, via email

Letters can be mailed, faxed or e-mailed to: 
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg 
New Delhi 110 002 
Fax: (011) 23720201  •  E-mail: letters@bsmail.in
All letters must have a postal address and telephone number