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Since GST rollout in July 2017, Rs 45,682.83 crore fraud detected

Since GST rollout in July 2017, Rs 45,682.83 crore fraud detected

A total of 9385 cases of tax fraud involving amount of Rs 45,682.83 crore has been detected by the tax authorities under the Goods and Services Tax (GST) regime since its rollout from July 1, 2017, government data showed. Out of this, 1,593 tax fraud cases involving an amount of Rs 6520.40 crore have been detected in April-June, the first three months of this financial year.

In a response to a question regarding tax frauds under GST, Minister of State for Finance Anurag Thakur said tax fraud worth Rs 37,946.41 crore was detected in 7368 cases in 2018-19.

Also, in 2018-19, Rs 11,251 crore worth of cases of tax credit availment by issue of fake invoices were detected by the tax authorities and Rs 2,805 crore in April-June of the current fiscal, Thakur said in his written reply.

Just five cases of tax credit availment by fake invoicing were detected by Central GST formations in the first year of the GST implementation (July 2017 to March 2018) involving an amount of Rs 12.67 crore and two persons were arrested.

The government said it has taken various measures to curtail these types of fraud. “Field formation(s) of CBIC, are sensitized to keep check on these kinds of activities and take necessary action.

A specialised Directorate within the Central Board of Indirect Taxes and Customs (CBIC) engaged in Data Analytics & Risk Management disseminates analytical reports and intelligence inputs to field formations of CBIC for the purpose of scrutiny, audit and enforcement, to check GST evasion in general and fraudulent credit availment in particular,” Thakur said in his reply.

In 2018-19, 1,620 cases of fake invoicing were detected involving Rs 11,251.23 crore, and 154 persons were arrested. Between April-June of 2019-20, 666 cases of fake invoicing were detected and the amount involved stood at Rs 2,804.98 crore. A total of 41 persons were arrested.

To a query on tax fraud cases after the GST rollout, Thakur said 424 cases involving Rs 1,216 crore were detected between July-March period of 2017-18. Another 7,368 cases involving Rs 37,946.41 crore were detected in 2018-19 and 1,593 cases of Rs 6,520.40 crore were detected in April-June of 2019-20.


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Source: Indian-Express
Advance Ruling Authority under GST: Does it really solve the taxpayer’s issues?

Advance Ruling Authority under GST: Does it really solve the taxpayer’s issues?

Since the advent of GST Laws, trade and industry have faced multifarious issues relating to uploading of returns, availing legacy Cenvat credit under TRAN-1 form, various confusions regarding the generation of e-way bills and many other such small issues.

When the Government introduced the Advance Ruling Authority under GST, it sought to provide a much wider coverage as compared to the earlier Excise and Service Tax Regime, in order to provide an early resolution of the potential tax dispute coming from the trade and industry. For the first time in any Tax Legislation, an appeal mechanism was provided against the orders passed by the Advance Ruling Authority which was absent under the earlier laws and also under the existing Income Tax Act.

This welcome step by the Govt was met with overwhelming support from the trade and industry and as a result, thousands of applications were filed before the Advance Ruling Authority seeking clarification on a variety of tax issues. Surprisingly, the Advance Ruling Authorities of various states had not only come up with contradictory rulings on the same subject but also most of the rulings were decided in favour of the revenue only. Further, the applicants rarely got any relief before the Appellate Authority of Advance Ruling as well.

Probably, the constitution of this forum, which consists only of revenue officers and not having an independent judicial member is one of the biggest reasons for this outcome. Hence, instead of getting relief, the trade and industry started facing this unique challenge.

This situation was further worsened by the recent order passed by the Bombay High Court in the case of JSW Energy Limited wherein it has been held that no appeal can be filed against an order of the Appellate Authority of Advance Rulings on “merits” since no appeal has been provided under the GST Act. Without going into the merit of this judgment, which seems to have ignored the well-settled proposition of law that a writ petition is indeed maintainable before the High Court, the order of the High Court has certainly created chaos in the Industry.

Seeing this trend, strong perception in the Trade and Industry is getting build as to why one should even approach the Advance Ruling Authority who is likely to decide the matter against the assessee and when practically there is no appeal mechanism against the said order. Whereas if the assessee opts the route of the adjudication, the doors of the tribunal as well as the courts would always be open to seek relief. Given this, it appears that the whole objective of creating this forum to provide speedy resolution of issues, instead of going through the long-drawn litigation route, is getting defeated.

Hence, it was a genuine wish and demand of the industry that the Government should bring some reform in the structure and give life to this forum. Appreciating the need of the industry, the newly elected government in this Budget tried to address this issue by introducing the National Appellate Tribunal for Advance Ruling (NATAR) under Section 101A of the CGST Act, 2017. The proposed NATAR will be presided upon by a retired Judge of the Supreme Court or any High Court and would be accompanied by two technical members representing both the central and the state government.

The composition of the NATAR appears to solve the issue of departmental bias, by introducing a judicial member and also introducing an option of appeal against orders of the Appellate Authority which was previously absent under the GST Laws. However, the wording of proposed Section 101B of CGST Act suggests that an appeal before NATAR would lie only in cases where the views taken either by the members of Appellate Authority of Advance Ruling constituted in the same state or in different states are contradictory.

Though this new proposal by the Government seems to provide relief in some aspects i.e. when there are contradictory views from either of the members of the same Bench or amongst the co-ordinate Benches of different states. However, there is no relief provided against the order of the AAAR if the ruling goes against the assessee. Therefore, the NATAR would have a limited utility and this brings the taxpayer back to square one.

As per the trend of the Advance Authority Rulings thus far, it has been seen that two co-ordinate benches of the Appellate Authority rarely differ in their views when it comes to a single issue. Similarly, a situation wherein the members of the same bench of the Appellate Authority (who are both departmental officers) differ in their opinions, is also rare. Therefore, the NATAR will be limited to addressing rare situations wherein conflicting views have been taken by two or more Appellate Authorities (of different states) or two members of the same Appellate Authority Bench. Thus, despite the introduction of NATAR, effectively there is still no appellate forum available to the assessee having an adverse order of the AAAR.

This issue will only be solved if the NATAR is given wider powers to adjudicate on “any” order passed by the Appellate Authority. Hence while passing the Bill, the Government should make suitable changes in the Bill to provide the much-anticipated relief to the Industry.

In summation, the introduction of the NATAR by the government only solves the issue of the assessee on the surface. However, the real issue of having an efficacious appellate remedy against the orders of the AAR still eludes the taxpayers.


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Source: Business-Today.
National Anti-profiteering Authority gets teeth to probe beyond the scope of DG’s complaint

National Anti-profiteering Authority gets teeth to probe beyond the scope of DG’s complaint

India has handed out more powers to the anti-profiteering watchdog, allowing it to widen a probe against a company to include goods or services not covered in an investigation report.

The government has notified the rule changes, inserting a provision in the goods and services tax rules to allow the National Anti-profiteering Authority, or NAA, to direct the Director General of Anti-Profiteering to further a probe if there is reason to believe that there has been contravention of norms in respect of goods or services not covered in the latter’s report.

The move comes on the heels of GST Council, the apex decision making body for the levy, extending the tenure of the NAA by two years. The Council had also approved imposition of an additional penalty of up to 10% of the profiteered amount if the companies don’t pay up a fine of ?25,000 in 30 days.

In the past, there have been cases where the DGAP had sought to widen an inquiry to other goods or services beyond the scope of a complaint. Tax experts said companies now need to prepare themselves better.

NAA

“This new provision now specifically allows the NAA to extend investigation to other products as well… From the industry standpoint, it means that the ambit of antiprofiteering proceedings might increase and hence there have to be adequate controls and documentation in place with respect to all products that a company is dealing in,” said Pratik Jain, national leader, indirect taxes, PwC.

The June 28 notification also empowers NAA to summon any person in relation to an inquiry. This was earlier limited to the DGAP or its officers only.

Further, the DGAP has been allowed to complete an investigation within six months from the date of receipt of reference from the standing committee instead of three months now. The DGAP will get additional time to complete any new investigation handed out by the NAA. The DGAP can continue to apply for a three-month extension from the NAA.

A standing committee can now apply for a one-month extension from the NAA, in addition to the two months allowed for examining a complaint or application. Similarly, the NAA can now issue its order within six months — instead of three months earlier —from date of receipt of report from the DGAP.

India put in place an anti-profiteering system to ringfence consumers from sudden spikes in prices after GST was rolled out in July 2017. Countries that implemented GST had witnessed an increase in inflation soon after doing so. It had studied mechanisms that Malaysia and Australia adopted as part of their GST framework.

The country went in for a three-tier structure to investigate anti-profiteering complaints from consumers. At the initial level are the state screening committees and a national standing committee to examine complaints. These committees refer complaints to the Director General of Safeguards, mandated to conduct a thorough investigation by seeking information from the companies concerned. The third and final level is the NAA, which examines the investigation report and hears the company and the complainant before pronouncing a final decision.

Source: Economice-Times

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GST Council mandates e-ticketing for cinemas, industry players say no impact on business

GST Council mandates e-ticketing for cinemas, industry players say no impact on business

Last week during the 35th GST Council meeting, electronic ticketing system was made mandatory for multiplexes. The move is to keep a check on possible Goods and Services Tax (GST) evasion and to put an end to the sale of coloured tickets that a few cine complexes are still using.

According to the GST Council, multiplexes will be required to issue a tax invoice electronically and for this purpose, the electronic ticket issued by them shall be deemed to be a tax invoice.

So, what does the government mean by e-ticketing?

E-ticketing means computerised ticketing. A computerised ticket is where the information can be stored digitally.

There are operators that issue manual coloured-paper tickets. Despite, having GST numbers, it has been difficult to track the tax calculation.

Hence, the GST Council has asked all multiplex operators to maintain a digital record of all the transactions, which is possible only when they issue computerised tickets.

The council has mandated mentioning the GST invoice number, the GST number and the SAC code (Services Accounting Code) in the computerised ticket. This would help in the digital storage of the aforementioned elements, making it is easy to monitor and pull out data as compared to manual tickets.

While the move will bring greater tax compliance, the question is how will it impact multiplex players?

Talking to Moneycontrol, Mukta A2 Cinemas Business Head Sachidanand Shetty said, “The impact will be positive as we’d have to do away with the dependency on manual tickets. We’re already e-ticketing compliant.”

He added that the move is a step towards realistic sales with better control and swift reconciliation of box office revenue.

This means that selling GST compliant movie tickets will lead to transparency and it will tell the actual collection of the Indian film industry.

However, most of the multiplexes are already selling e-tickets.

According to Miraj Cinemas MD Amit Sharma, “E-ticketing is more symbolic in nature as over 90 percent cinemas and 100 percent multiplexes have already been doing e-ticketing for years.”

“Maybe the government is looking at it (mandatory e-ticketing for multiplexes) as a case model for other B-to-C (business to customer) places for implementation.”

Inox Leisure, one of India’s largest multiplex chains, is also e-ticketing complaint.

Inox Leisure CEO Alok Tandon said, “We have been issuing computerized movie tickets ever since Inox’s inception due to which making ticketing and billing systems GST compliant was a matter of hours for us.”

“100 percent of our ticketing is computerized and GST compliant as it bears all the details like GST number, GST Invoice number and the SAC code,” he added.

Impact of mandatory e-ticketing on online ticket booking business

On whether mandatory e-ticketing will have an impact on the online movie ticket booking business, Shetty said that it “should boost the same by about 5 percent to the current sales of Mukta A2 Cinemas.”

“While multiplex chains more or less follow the same in all markets – Tier I, II and III – now the new rule will ensure compliance all across,” he added.

In terms of online ticket sales, Inox sells 40-50 percent tickets online whereas, Mukta A2 cinemas is in the range of 35-40 percent.

Multiplexes are welcoming the move saying that e-ticketing will help maintain records in a digital manner, leading to more accurate computation of industry revenue and estimation of due taxes to be levied.

TRA Research CEO N Chandramouli, however, has pointed out another aspect of this move.

He said, “While better tax compliance has been the objective of all governments, from even before democracies were popular, today it has become rigid, inflexible and obdurate.”

“Tax is an earning of the government for services it provides, but businesses are left helpless if they have no room to negotiate the services they get for taxes they pay. If businesses become afraid of doing business because of the tax regime, I think the purpose is defeated at all ends,” he added.

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Source: Money-Control.
What government is doing to improve GST compliance

What government is doing to improve GST compliance

1) What’s the direction of GST in the near term?

Central and state tax officials have until recently taken a lenient approach in administering the technology-driven tax, allowing businesses and traders time to adapt to the new regime. This is quickly making way for a tough new approach to check evasion. Implementing a new, simpler tax return filing form that will make tax evasion harder and stabilizing revenue collection top the agenda of the GST Council. Its medium-term agenda includes converging the two standard tax rates—12% and 18%—applicable on a large number of items somewhere in the middle as revenue collection improves.

2) What’s the plan to check tax evasion?

The GST Council plans to curb tax evasion by using technology and data gathered from various sources to their full extent. One of the proposals is to ask large firms to generate invoices for business-to-business transactions on a designated portal. This will help prevent instances of the buyer taking credits for taxes that the seller has never paid to the government. Identifying and plugging revenue leakage would be a priority for the GST Council, said EY tax partner Abhishek Jain. “The proposed new return form will restrict tax credit utilization to the extent the invoices uploaded by the seller will allow,” he added.

3) What about evasion at the retail level?

Selling without invoices, often with the connivance of the buyer, and the retailer pocketing the tax amount collected from the buyer instead of remitting it to the government are two ways tax evasion takes place at the retail level. Sale without invoice will require inventory more than what is shown in the records. This is often done by using the same e-way bill (electronic permit for transportation of goods) multiple times. Officials believe the plan to validate e-way bills with the data collected at toll plazas of movement of radio frequency identification-enabled vehicles will help check this problem.

4) In what way will close coordination between the direct and indirect tax administration help?

Experts say that globally, indirect tax reforms have helped improve income tax and corporate tax collections as the transparency in sales achieved by GST makes it harder to hide income. Close coordination between the two streams of taxation helps officials to connect the dots and profile assessees better.

5) How serious is the revenue shortfall?

The combined monthly target of central and state governments for this fiscal is about ₹1.14 trillion. They collected just over ₹1 trillion in May, up 6.7% from the same month a year ago but below the monthly target. Revenue shortfall implies the centre has to compensate states for their losses. The sluggish pace of revenue growth means there is not much legroom for the GST Council to cut tax rates in the near future unless revenue receipts soar.

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Source: Live-Mint.
Govt probes I-T and GST mismatch in crackdown against evader

Govt probes I-T and GST mismatch in crackdown against evader

Back in office, the Modi government is set to take up the next stage of action against tax evasion and money laundering with data analysis helping detect thousands of overstated goods and services tax (GST) claims that don’t match up with income tax returns.

Action against these entities, which might be the first layer of suspicious transactions, is being launched with notices being sent out. The clean-up operation follows the earlier exercise where potential shell companies were scanned and directors were found fake. Many of these companies were struck off the rolls.

This is the first time the government is matching income tax and GST returns and initial findings have pointed to an overstatement of GST claims and understatement of income in tax returns, officials told TOI. The action against such entities might be tough with the Supreme Court recently refusing to protect GST violators from arrest.

Data analytics is seen to be the core focus of the revenue department in the coming months as some of the analysis has also pointed to misreporting on the customs front. For instance, some traders have shown inflated imports, remitted funds overseas beyond the requirement and then claimed exports. But the exports proceeds are not reflected in the income tax returns.

“So far, various tax agencies were working in silos but now it’s possible to tally data and go after evaders,” explained an official, adding that thousands of companies were identified based on preliminary data mapping. With the BJP campaign stressing the government’s action against corruption, the revenue department is picking up threads now that the election is over.

For long, tax authorities have complained of leakages in GST but the political leadership at the state and the Centre wanted more time for the new regime to settle down. With polls over, arrests have begun in several cases, with Manpasand Beverages being a prime example. Recent court rulings have also strengthened the tax department’s case to crack the whip.

One of the most glaring gaps noticed by tax officials is the use of shell companies to make bogus claims. In several cases of fraudulent claims, identity theft was also noticed.

In these cases, a company is set up which gets into non-existent transactions with entities that have virtually no real business or is related to them. Tax officials have come across instances of drivers, gardeners or slum-dwellers being directors of these companies.

Based on these transactions, the companies claim a fraudulent tax credit. But these transactions and income are not reflected in their I-T returns. Authorities have come across cases where slum-dwellers were made to fill up a form to join a delivery service and details such as Aadhaar numbers were collected. This information was then used to open bank accounts and set up companies. Similarly, domestic help and drivers were made to fill up forms, ostensibly to open bank accounts but were made to sign on papers to set up companies. Separately, steps are being taken to strengthen other monitoring tools to plug gaps and prevent GST evasion.


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Source: Times-of-India
GST Council sets up 2 sub-groups to examine legal, technical aspects of e-invoice for B2B sales

GST Council sets up 2 sub-groups to examine legal, technical aspects of e-invoice for B2B sales

The GST Council has set up two sub-groups to look into the policy and technical aspects, such as turnover threshold and mode of generation, for e-invoice generation by businesses.

While one sub-group will examine the business process, policy and legal aspects for a generation of e-invoice, the other will recommend technical aspects for its roll-out.

The sub-group on policy issues would also suggest some “immediate steps” to check fake invoices in case of business-to-business (B2B) supplies with a high threshold turnover and also recommend a carve-out for sectors like banking and telecom.

Electronic invoice, or e-invoice, has been envisaged by the revenue department to mainly curb goods and services tax (GST) evasion.

The sub-group on policy issues for e-invoice would recommend legal aspects including invoice format, threshold turnover for invoice generation from the portal and immediate steps for ‘B2B’ supplies with a high threshold turnover.

It would also suggest optional treatment for some sectors such as banking, telecom, tentative timeline for execution and phase-wise implementation.

The sub-group on technical issues would suggest a mode of generation, like app-based or mobile or SMS or offline and online, data security and system integration.

Depending on the success of the project in the B2B segment, the revenue department would look at extending it to business-to-consumer (B2C) sales, especially in sectors where the probability of tax evasion is high.

A 13-member officers’ committee, comprising central and state tax officials as well as the GST Network chief executive officer, has been set up to look into the feasibility of introducing e-invoice system to streamline the generation of invoices and easing the compliance burden.

The two sub-groups have been set up under the committee.

The proposed e-invoice is part of the exercise to check GST evasion. With almost two years into the GST implementation, the government is now focussing on anti-evasion measures to shore up revenue and increase compliance.

There are over 1.21 crore registered businesses under the GST, of which 20 lakh are under the composition scheme.

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Source: Economic-Times.
GST Anti-Evasion Unit Goes After Car Dealers For Retrospective Tax

GST Anti-Evasion Unit Goes After Car Dealers For Retrospective Tax

The government has questioned the goods and services tax anti-evasion unit for demanding retrospective tax from automobile dealers on discounts received from manufacturers to boost sales, according to a person aware of the development.

The Central Board of Indirect Tax Customs considers such transactions as a discount and not a service, the person told BloombergQuint on the condition of anonymity.

The Mumbai team of the Directorate General of Goods and Services Tax Intelligence issued show-cause notices to 40 dealers, including sellers of Maruti Suzuki India Ltd. and Hyundai Motor India Ltd.’s vehicles, asking them to pay Rs 83 crore as tax since July 1, 2012, the person quoted above said.

According to the GST intelligence body, discounts given to dealers or distributors were used for promotional activities and were liable for service tax payment, the person said. The agency, the person said, wants to tax dealers based on the interpretation that they are providing a service to car manufacturers.

Sumit Lunker, indirect tax partner at PwC India, however, told BloombergQuint that if an amount is being offered as a discount by the seller, it cannot be considered as a service offered by the recipient. Maruti Suzuki and Hyundai India have yet to respond to BloombergQuint’s emailed queries.

Secondary Discounts

According to the person quoted earlier, the GST probe agency also asked distributors to pay tax on post-sale discounts—not part of the original sale when the vehicles are sent to dealerships but offered later as an incentive to clear inventory.

Against such discounts, according to the GST law, manufacturers have to issue credit notes to dealers, and pay the tax on the entire amount including the discount. But the GST probe agency also asked the dealers to pay tax on such discounts, calling it a service to advertise or promote the manufacturers’ brand, the person said. And it raised the demand since 2012.

The government, however, said the intelligence body wrongly interpreted the GST law to raise a service tax demand retrospectively when the GST was not even implemented, the person said.

Udit Gupta, partner at law firm Udit Kishan & Associates, agreed. “No tax demand can be raised under the CGST Act for a period prior to July 2017,” he said. “Such demand is not legally tenable and will disrupt The taxman, he said, should avoid such proceedings.

Has Wider Implications

The issue has widespread implications as similar practices are prevalent among consumer goods makers, according to the person quoted above. The industry needs to be informed about the correct legal position and the stand of the government to avoid litigation, the official said.

In March this year, the government had clarified that consumer goods makers need not pay tax on promotional offers like ‘buy one get one free’. This came after the intelligence body asked these companies to pay tax on goods provided for free in promotional offers.

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Source: bloomberg Quint.

Builder can’t charge higher GST for location, parking

Builder can’t charge higher GST for location, parking

There may be further GST (goods and services tax) relief for home buyers with the Authority on Advance Ruling (AAR) in West Bengal concluding that services such as preferential location and facilities like car parking in apartments should be treated as “composite construction service” and attract the same levy as construction.

After the ruling, builders will now have to charge 5% GST on services bundled with affordable homes and 8% on others. Several builders, including some of the top players, were charging 18% GST on these services, while the government had lowered the rate for under construction apartments. The government allows one-third abatement or rebate on the value of land, that results in the actual levy coming to 8% for non-affordable category residential units when the GST rate is 12%.

“Taxability of ancillary charges recovered by builders like preferential location charges (PLC), parking charges, transfer fees, external development charges, internal development charges (IDC), document charges etc has been a matter of dispute even under the erstwhile service tax regime. With this ruling, it is likely that diverse practices adopted by builders on taxability of PLC and parking charges end, and such services henceforth are made liable to tax at the lower rate as applicable to construction services.” said Harpreet Singh, partner at consulting firm KPMG.

“The real estate sector was in a conundrum on the taxability of preferential charges, right to use car parking, etc; the essential reason being as to whether some of these qualified as under construction service on which the lower GST rate of 12% or 5% would be available or they would be taxed at 18%.


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Source: Times of india.
GST: B2B invoices will have to be generated on govt portal by Sept

GST: B2B invoices will have to be generated on govt portal by Sept

All invoices for business-to-business sales by entities beyond a specified turnover threshold will be generated on a centralised government portal by September, a move aimed at curbing the menace of fake invoices and evasion of GST, officials said.

The revenue secretary is monitoring the progress of implementation of electronic or e-invoice project for which an officers’ committee has already been set up, they added.

“E-invoice for B2B transactions will be rolled out in next three-four months in a phased manner. The entire invoice would have to be generated on a government portal,” an official told PTI.

The move will help in curbing Goods and Services Tax (GST) evasion through the issue of fake invoices. Besides, it would make the returns filing process simpler for businesses as invoice data would already be captured by a centralised portal.

“Once rolled out, the e-invoice project will allow businesses to simultaneously generate e-way bill if needed,” the official added. E-way bill is required for moving goods exceeding Rs 50,000.

Depending on the success of the project in the B2B segment, the revenue department would be looking at extending it to business-to-consumer (B2C) sales, especially in sectors where the probability of tax evasion is high.

Businesses beyond the specified turnover threshold, to be decided later, would be provided software which will be linked to the GST Network (GSTN) or a government portal for generating e-invoice. The threshold can also be fixed on the basis of the value of the invoice.

The e-invoice generation method will be similar to the one being followed for an e-way bill on the ‘ewaybill.nic.in’ portal or payment of GST on the GSTN portal.

A 13-member officers’ committee, comprising central and state tax officials as well as the GST Network Chief Executive, has been set up to look into the feasibility of introducing e-invoice system to streamline the generation of invoices and easing the compliance burden. The committee will finalize its interim report this month.

The proposed ‘e-invoice’ is part of the exercise to check GST evasion. With almost two years into GST implementation, the government is now focussing on anti-evasion measures to shore up revenue and increase compliance.

There are over 1.21 crore registered businesses under the GST, of which 20 lakh are under the composition scheme.

XaTTaX: Cloud and On-Premises Based GST Filing Software For India

Source: Business-standard.