Government to Integrate Data Repositories to Combat GST Evasion and Fraud

The Central Board of Indirect Taxes and Customs (CBIC) is considering merging its current database managed by DG (Systems) with that of the Goods and Services Tax Network (GSTN) to broaden its coverage of taxpayer activities and combat tax evasion, according to a senior official speaking to FE. "CBIC is looking to transition GSTN into the primary database, commencing in the first week of June," stated the official.

Currently, the common GST Portal, developed by GSTN, serves as the "front-end" of the overall GST-IT ecosystem, while DG (Systems) serves as the "back-end," handling tax administration functions such as refunds, investigations, and adjudications by tax officers. "Starting from June, GSTN will also serve as the back-end," the official added.

This merger initiative is primarily aimed at curbing tax evasion. In FY24, the Directorate General of GST Intelligence (DGGI) identified over 6,074 cases involving duty evasion totaling over Rs 2.01 trillion, approximately 10% of the total GST collection for the fiscal year. Additionally, voluntary payments amounting to Rs 26,598 crore were made, contributing about 1.4% to the total GST collections for FY24. In FY23, official data shows that 4,872 cases of GST evasion were detected, involving duty evasion of Rs 1.01 trillion, with voluntary payments reaching Rs 20,713 crore.

Gopal Mundhra, a partner at Economic Laws Practice, remarked that the proposed integration of GSTN and DG (Systems) will streamline the flow of taxpayer data within a unified setup (GSTN), eliminating the need for a dual approach to detect tax fraud.

GSTN serves as a standardized IT interface connecting taxpayers, the Central government, and state governments. Its responsibilities include managing the common GST electronic portal, facilitating registration and return filing, forwarding returns to central and state authorities, and handling the computation and settlement of Integrated GST (IGST).

In contrast, the Directorate General (Systems & Data Management), or DG (Systems), focuses on integrating technology into departmental processes. It provides data support to the CBIC and field formations by compiling and distributing data related to tax collection, adjudication, appeals, court cases, etc.

The official mentioned earlier informed FE that the merger would facilitate better coordination between CGST and SGST officers in identifying tax evaders.

Shivam Mehta, an executive partner at Lakshmikumaran & Sridharan Attorneys, explained that the sharing of details between authorities would enable swift identification of issues, enhancing enforcement efforts.

Additionally, as DG (Systems) oversees IT systems for customs operations, including data management for import and export activities and central excise duties, the merger would improve transparency in cross-border transactions. This transparency would aid in identifying tax evasion, such as valuation discrepancies or inconsistent tax rates applied to imports compared to domestic supplies, according to experts.

Tanushree Roy, Director- Indirect Tax at Nangia Andersen India, noted that unified access to comprehensive and timely data would enable more effective monitoring, advanced analytics, and coordinated enforcement actions. Ultimately, this would lead to improved tax compliance, increased efficiency, and reduced tax evasion.