Author: GSTWALA

Black money is one of the most serious question of the Country. GST being the game changer, it is expected and presumed by the expert that after rolling Out of GST, the question of Black money will surely be addressed and as a result the GST will surely succeed in span of time to curb the black money in India.

As GST will be monitored by complete online process with GSTIN (Goods And Service Tax Identification Number) which will be linked to current PAN (Permanent Account Number),lt will be difficult to escape from tracking of your transactions in any case.
Rather it can be said that the person himself will not go for practice of hiding of transactions as “if a retailer has purchased goods from a whole seller and is not showing that purchase today, then he will not be able to do so after GST. Thus, to substantiate his purchase he will have to maintain the books of sales for which proper bills will be generated. So any trader after GST will not be able to sell products or goods without bills. Once a bill exists in the system, scope for black money reduces automatically.”
The dual monitoring structure proposed within GST, involving the Centre and the states will also curb income tax evasions. So, even if one set of tax authorities overlooks or fails to detect evasion, there is the possibility that the other overseeing authority may not.

Black money in our Country Is mainly generated in three main sectors
1. Alcohol
2. Real Estate
3. PrecIous Metals
   
 

As alcohol yet to remain out of GST for some time, it will be included afterwards. But Precious Metals and Real Estate both are to be taken under GST. Real estate, a sector which absorbs and generates maximum amount of black money, the uniform tax structure will ¡mprove tax compliance by developers, local builders, property dealers, investors and occupiers. The mandatory paper trail that GST will create will go a long way in improving tax compliance.

Example:
GST rate is higher so it will increase cost for local people i.e. 5000*1896= 900 so customer will pay 5900 in place of 5750 earlier.
Post GST in long term,
Business man now have to pay Rs. 900 as GST collectted from customer, but now he can take credit of Rs. 125 of whatever as credit as it will no more goods tax or service tax, it will goods and service tax(GST). Now Businesman can pass on saving of Rs. 125 to its customer by lowering price say 4875 or it can increase its profit by Rs. 125.
This way GST will be helpful for local people.
In addition to this credit of paid can be claimed online like its, if other party paid then only you will get credit for the same. It will also help in reducing tax evasion.
Black money Generation
Let us take a look at easy generation of black money from these Sectors.
First of all the Real Estate, the sector which generate the Black Money very easily by paying partly in cash and partly in cheque. When one go to buy a property, he pays the amount in part and only duty on cheque amount to be paid. So as a resuft the flow of Black money i.e. money goes from Buyer to Seller in Cash started and the Seller uses that money to purchase Gold or other precious metals that can be easily stored and hide and the chain remain continue.

Same way Alcohol.
Take an example of Gujarat which ¡s dry state. In Gujarat use of Alcohol and trading of ¡t is not allowed. But people use it silently. So in this case generation of Bill, paying of tax, recording of transaction, flow of money etc. nothing come in limelight so it leads to Black Money Increase.
It is said that all these sectors will be given special attention and provisions that no one will be able to escape from DUAL GST STRUCTURE. Though it will not be able to remove and curb whole black money as our Human Minds are so creative that will find the ways to escape from these clumsy provisions too, but it will surely help to reduce it ten current scenario.

GST or its substitute Value Added Tax, Conceptually a destination based tax on consumption of Goods and Services  has been a global phenomenon for way too long now, We can trace it back to Year “1954” when France became the first country to introduce a comprehensive Goods and Service Tax regime in that year. Currently around 160 countries in the world have adopted GST or similar Tax Regime. The most interesting thing to note is that there are around 40 different models of GST presently in force, around the world, each having its own peculiarities.

The best way to categorize GST is by recognizing who has the power to Levy such tax in the country. On that basis there are majorly two categorization:

Single Levy
Dual Levy (As in Canada & Brazil)

Countries across the world have used GST as a tool to increase their revenue from Indirect Taxation, to increase the Tax Net and to decrease the number of Tax Evaders and simplify the Tax Ecosystem.

The most contentious issue that still needs to be to be resolved among the different governance in the world is deciding the rate at which GST should be charged in the country. While the Governments across the world aim to increase their tax revenue through GST, a higher rate will lead to tax evasion.

There have been two common factors which have been noticed worldwide wherever and whenever a Tax Structure like GST has been introduced:

Increase in inflation as GST normally is kept at Revenue Neutral Model, which is generally above the ongoing rate structure.
GDP growth at around 9%, resulting in development of the nation.

It’s a non deniable fact that the immediate impact of GST is increase in inflation, especially if the effective tax rate is higher than what prevailed before. For instance, Singapore saw a spike in inflation in 1994 when it introduced the GST but as the time sets in and the citizen/business personals get used to the phenomenon called GST it leads to a more clearer and understandable tax structure contributing to the growth of economy.

One of the successful examples of Dual GST model is Canada. Why Canada is important, because it is one country which even after strong political opposition has been successful in implementing GST. But it has not been an easy task, the Government of Canada has been pragmatic as it worked towards the reduction of GST rate couple of times, post implementation.

Most of the countries of European Union, UK, New Zealand and various other countries have been forth runner in implementing GST and are now reaping the benefits of this destination based Tax Structure.

It should be understood that throughout the world, introduction GST has never been a single event of introduction of a new tax regime, rather it is a continuous process through which governments have brought in tax reforms.

This is the question which is hovering over mind of each and every person in the country. Well there is no straight answer to that question but let’s see the measures being introduced in GST ta tackle the monster of black money.

1. Well, the most basic reason behind generation of black money is the age old system practiced in our country of “kacha bill” and “pakka bill”. The ‘kacha bill’ and ‘pakka bill’ system in our country has helped mobilize black money. GST will help put an end to this. Now, let’s see what is “kacha bill” and “pakka bill”. A kacha bill is the bill on which a consumer need not to pay tax to seller of goods i.e. kacha bill is a bill which is not a sale invoice and not a tax invoice. It is not reflected in books of traders. Since, the consumer do not want to pay tax, traders are forced to buy goods on kacha bill from whole sellers/distributors and it’s a never ending progressive chain of tax evasion.

A pakka bill is essentially either a sale invoice or tax invoice on which the buyer needs to pay tax on value of goods being purchased. Since, tax is paid, it is accounted for in financial system.

This system of kacha bill and pakka bill is dual edged sword. How? Since kacha bill is not accounted for in books of accounts of trader, he escapes from paying income tax on income generated from the transaction of sales and purchase i.e. Direct tax is avoided. Since no record of sales is made in kacha bill, no liability for paying sales tax, excise duty, octroi etc. arises i.e. Indirect Tax is avoided.

Under the GST regime, all the purchases as well as sales invoices are required to be uploaded on the GSTN site, at the end of each month. Now if a trader issues a fake invoice or if he doesn’t deposit the tax amount with the Government, the buyer of the goods will be intimated about it. Also the buyer will be denied the credit of the goods. This will make the buyer avoid such sellers. Also such cases are automatically intimated to the government. Thus, the currently untraceable transaction will get easily identified in the GST regime. Even if the transaction enters the system once, at any point in the supply chain, the government has built in business intelligence tools to catch hold of all parties in that supply chain who have not paid GST.

Also there would be a rating system, through which such traders would be rated. In case of defaults, the traders will get a bad rating. Potential buyers would not buy from traders with bad ratings. This data will also be shared with the Income tax department. All these schemes, will make it very difficult for the traders to do a black money transaction.

2. One of the important point in curbing black money is the information exchange, which, somehow is absent in various government departments whether be it Central government department and/or state government department. Lack of information exchange provides a loophole for tax evaders to file different set of tax returns, books of accounts and other related financial documents to evade tax.

Permanent account number (PAN) and Aadhar will be used more frequently, and will be required to file GST returns. This will help the taxmen track transactions more systematically. There can be more data mapping for audit by revenue authorities. Both the Central Board of Direct Taxes and the Central Board of Excise and Customs have started sharing data to monitor the flow of black money more effectively.

Thus, dual monitoring structure of GST by state as well by central government will improve inter government
and inter department co-operation leaving no space or very less space of manipulation.

GST will simplify and harmonize the indirect tax regime in the country. It will broaden the tax base and result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one state to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders. It is thus expected that introduction of GST will foster a common and seamless Indian market and contribute significantly to the growth of the economy and contribute towards curbing black money.