Sharing of Data between Income Tax and GST Authorities

Background

The CBDT has the power under section 138 of the Income-tax Act, 1961 to provide information received or obtained by income tax authorities to any officer, authority or body performing any functions under any law relating to the imposition of tax, duty or cess. A memorandum of understanding (MOU) has been signed between the two tax authorities i.e Central Board of Direct Taxes (CBDT) and Central Board of Indirect Taxes and Customs (CBIC) for exchange of following information like:

• Whether or not ITR has been filed
• Turnover
• Total gross income
• Turnover ratio
• Gross total income range
• Turnover range. 

The spontaneous and automatic exchange of information also is permitted, and includes information other than that provided in the ITR. When providing the information, the income tax authority must be satisfied that sharing the information is necessary to enable the GSTN to perform its functions in accordance with the GST legislation.

On similar lines, CBIC will also share information of taxpayers from its database like purchase made, turnover details, HSN code etc. 

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Over the period of time, it has been noticed that payment of taxes has been reduced mainly due to tax evasion and undisclosed sales. So, in order to curb this practice of tax evasion, MOU has been signed between the tax authorities in which information will be shared to avoid tax evasion and increase reporting of turnover. This sharing of information includes tracing non-filers under the Income Tax Act, 1961 and the Goods and Services Act, 2017. This shall help both the authorities to match revenue reported by taxpayers under Income Tax and GST.

Step by step guide

Any mismatch of data will be auto-populated or reflected in the E-Campaign tab of Compliance Portal on the website of the IT Department. The step by step process for viewing the GST data on IT website is discussed below:

Step 1: Go to https://www.incometaxindiaefiling.gov.in/home and login to the portal using e-filing User ID and password

Step 2 – Now under Compliance tab, Select “Compliance portal” option and click on Confirm button

Step 3 – Now Go to E- Campaign tab a notification will come under Non- filing of return

Step 4 – Now, click on the Notification, you will see the details for which non filing notice has been received. If you further click on the Business transaction details it will show the list of purchases made during the year as below. This data is from the GSTR 2A of a taxpayer. 

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Important takeaways

• Taxpayers should take the necessary steps to ensure that the information they provide to the tax authorities in complying with their tax reporting obligations is consistent (e.g. on GST returns, ITR forms, etc.). Where the information does not reconcile, the reasons for any variations should be identified and appropriately documented;
• The Chartered Accountant has to be very careful while conducting GST audits along with IT audits and verify compliances and data under both the laws.
• Information in relation to GST required to be compiled  under Clause 44 of Form 3CD (the tax audit report) should correspond with the GST returns. Reasons for any variations should be identified and appropriately documented.

Other relevant points

As of now only details of expenses and purchases are being shared by the GST department but this will not be limited to such purchases only in future. It is very much possible that details of turnover HSN wise, place of business as reported in GST, E way bill details will also be shared. 

It may be noted that the decision regarding the type of information to be shared to the taxpayer under his income tax account over the IT website shall be discretionary. Many details and information shared by GST to IT may not be reflected in a taxpayer’s IT account. Instead that information shall be used by the investigation wing of the IT department as reasons to believe for initiating any assessment proceedings including raids against the taxpayer. This sharing of information will be a tool for taxing authorities to keep an eye over the business of a taxpayer.

GST being a mechanism running on a complete automatic IT based platform, it becomes very difficult for a taxpayer to under report income. Business income can be under reported by either showing bogus purchases or showing reduced sales. 

Since a taxpayer is required to report purchase details and expenses on the GST portal, this cannot be manipulated since it is directly uploaded by the supplier itself and the taxpayer has no control over the same. 

From a turnover point of view also it is not possible to under report since in case of B2B transactions a person to whom sales is made i.e the recipient would want to claim the input tax credit of taxes paid on purchases made by him in order to reduce his future tax liabilities under GST return. So, this will again make it difficult for the taxpayer to under report his income. 

Conclusion

Undoubtedly, it is a welcome step as this will help not only taxpayers but also to their tax advisors in reconciling turnover reported under two different platforms and also ensure timely compliance of reporting of the same. But it is high time for taxpayers to compare and then report the turnover especially in case of business organizations as taxing authorities have become robust along with advancements as never before. Any mismatch or planning done outside the four corners of law may lead to drastic impact and loss to taxpayers.