Revenue Secretary Sanjay Malhotra: Existing taxation structure reasonable, will stop abuse of GST flexibility

In September 2019, the government announced a cut in base corporate tax for then existing companies from 30 per cent, down to 22 per cent and for new manufacturing firms, incorporated after October 1, 2019, to 15 per cent from 25 per cent.

The government will take steps to prevent evasion of Goods and Services Tax (GST) by entities abusing the flexibility given to businesses to correct errors in transaction, Malhotra said.

Malhotra explained many business entities game the system, abusing the flexibility to correct errors and the extent of the tax credit they can claim.

Although the authority has information about the transaction details, some entities do not pay the correct amount of tax. Some buyer also claim the seller has made a mistake in making the invoice, claiming false credits on the tax due.

‘GST has given the flexibility to the buyer to make upward revision in the inputs tax credit available,’ Malhotra said

The correction steps taken will entail proper validation of transactions and claims without affecting genuine tax payers.

The move is part of efforts to ensure that tax revenue collection grows faster than economic growth rate in nominal terms

He added ‘We will make use of information available and curtail the facility of editing downward the liability to pay taxes by the seller and the flexibility given to increase the input tax credit by the buyer.’

The government will also integrate the IT platforms used by customs authorities and GST authorities for scaling up tax compliance using data analytics, so that the entire process is smoother. At present each agency uses its own IT systems.

The government predicted a revenue buoyancy of over 1 in the interim budget for FY25, implying faster tax revenue growth compared with the economic growth rate.