Hundreds of online vendors selling goods on e-commerce platforms like Amazon and Flipkart have received notices from the GST authorities to explain the differences in sales numbers reported by the e-commerce operators when they collected tax at source (TCS) and the sales reported by the sellers in their monthly return GST-3B. Large-scale evasion is suspected as taxpayers seem to have under-reported sales and paid lower taxes in self-declared returns.
The notices pertain to the October 2018 to September 2019 period. Taxpayers have asked to explain the mismatch within three days of receipt of notices. As FE had reported in December, the taxman had stumbled upon instances of huge discrepancies in taxable value brought out by two different modes of reporting.
“It is good that the system is detecting such fraud as such practices put undue pressure on honest and genuine sellers. We had supported the concept of TCS for online sellers precisely for this reason,” a vendor said, on condition of anonymity.
Under the GST system, sellers on e-commerce platforms, except those supplying services, are required to register on the GST Network, even if their turnover fall below the GST threshold of Rs 40 lakh per annum. Further, the e-commerce portals are required to deduct 1% of the taxable sales that take place on their platforms before making payment to the vendors and deposit the amounts with the government. The sellers can use the TCS as credit at the time of filing returns and paying taxes.
On the verification of data available with the office, it is noticed that there is a mismatch of taxable value that is declared by your TCS operators when compared to the value declared by you in your GSTR-3B returns for the period between October 2018 to September 2019,” said the notice sent to one of the vendors that was reviewed by FE. In this particular notice, the taxman had found under-reporting of sales by Rs 25 lakh while the taxpayer had declared and paid taxes on only Rs 16 lakh of sales in GSTR-3B.
Officials estimate that tax frauds of as much as Rs 90,000 crore a year could be taking place, of which the GST system is able to detect about only 10-15%. A large part of evasion happens through circular trading and fake invoices for availing input tax credit.
E-commerce operators as well as online sellers are independently loading information of taxable supplies made during a given month to GSTN, and any short-reporting by online seller would attract a notice for additional tax payment together with an interest of 18% per annum,” Rajat Mohan, senior partner at AMRG & Associates, said.
Officials said that some of the fraudulent practices under GST would be better tracked with e-invoicing mechanism which is scheduled to be implemented from April 1 for businesses having annual revenue of over Rs 100 crore. Along with the new simplified return, which is also expected to be implemented from April next year, tax officials would have better tools to detect and pre-empt evasion, they added.