How Will GST Curb Tax Evasion?

The consumers, traders, and sellers of India have big expectations from the Goods and Service Tax regime. A great number of promises have been made by the government, one of which is curbing tax evasion. However, how exactly will GST help prevent tax evasion and eradicate the problem of black money from the system? Let’s find out.

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India Before GST

There were many loopholes in the previous taxation system. Avoiding compliance was easier and there was no apt system to check tax evasion. Traders could easily underreport sales to avoid taxes by tampering with their ledgers or simply selling off products with illegal invoices. Plus, the level of corruption was extremely high. Even if a trader was caught and charged with illegal trading activities, they could easily bribe the officials to get away with them.

India Now

GST is making it nearly impossible to entertain tax evasion by:

1. Bringing Accuracy in Reported Goods

The entire GST regime is electronic and based on Goods and Services Tax Network (GSTN). All activities pertaining to sales, distribution, and consumption of goods are being reported on the GSTN. Thus, sellers can no longer fudge their sales.

2. Improving Compliance

GST synchronizes the supply chain of goods and services. For it to work, all the elements of the chain- manufacturers, distributors, and sellers have to follow the compliance standards. Thus, GST will improve compliance in the system.

3. Preventing Corruption

Corruption can only take place with activities that are off the record. However, under GST, everything is transparent through GSTN. Moreover, the GST council has enacted strict laws such as jailtime up to 5 years and penalties up to 100% of the evaded tax amount.

GST can be a game-changer for the Indian economy. With tax evasion and black money under check, the economy can easily reach new heights.