The Central Board of Indirect Taxes and Custom (CBIC) has made it clear that irrespective of assessees assigned under the Goods and Services Tax (GST) regime, officials from the Centre or State can initiate enforcement action against tax evaders and take it to its logical conclusion.
The directive will remove the ambiguity on initiation of enforcement action by the Central tax officers in case of taxpayers assigned to the State tax authority and vice versa. It is also meant to end jurisdictional disputes.
In a communication sent to senior Central tax officials, Mahender Singh, Member, CBIC, said: “It is accordingly clarified that the officers of both Central Tax and State Tax are authorized to initiate intelligence-based enforcement action on the entire taxpayer’s base irrespective of the administrative assignment of the taxpayer to any authority.”
The move will also help in higher revenue collection which is still in the range of ₹93,960- 1,03,459 crore while the estimate is between ₹1-10 lakh crore. Anita Rastogi, an Indirect tax Partner at PwC, said that intelligence-based enforcement action has taken a new importance considering that GST revenue has not really seen the increase as expected by the Government coupled with some sector-specific tax evasions being noticed recently. “Businesses would now need to deal with both Centre and State in specific situations,” she said.
The communication further read that the authority which initiates such action is empowered to complete the entire process of investigation, issue show cause notice, adjudication, recovery, the filing of appeals etc. In other words, if an officer of the Central tax authority initiates intelligence-based enforcement against a taxpayer administratively assigned to the State tax authority, the officers of Central tax authority will not transfer the said case to its State tax counterpart and will themselves take the case to its logical conclusion. The same system will follow for State tax authorities.
The Goods and Services Tax Network (GSTN) is making changes in the IT system to facilitate the new mechanism to work smoothly. So far there is nearly 1.14 crore business registered under assessees.
The whole issue arose due to the present system for distribution of administration. Of the total number of taxpayers below ₹1.5 crore turnover, all administrative control over 90 percent of the taxpayer’s vests with the State tax administration and 10 percent with the Central tax administration. In respect of the total number of taxpayers above ₹1.5 crore turnover, all administrative control is divided equally in the ratio of 50 percent each for the Central and the State tax administration. The division of taxpayers in each State has been done by computer at the State level based on stratified random sampling and could also take into account the geographical location and type of the taxpayers, as may be mutually agreed.
For the new registrants, the mechanism says that they shall be initially divided one each between the Central and the State tax administration and at the end of the year, once the turnover of such new registrants is ascertained, those units with turnover below ₹1.5 crore shall be divided in the ratio of 90 per cent for the State tax administration and 10 per cent for the Central tax administration and those units above the turnover of ₹ l.5 crore shall be divided in the ratio of 50 per cent each for the State and the Central tax administration.