Goods and Services Tax evasion rises to Rs 2.01 lakh crore in fiscal 2024

Considered as a worrying development, tax evasion under the Goods and Services Tax (GST) regime has skyrocketed to a staggering Rs 2.01 lakh crore in the fiscal year 2023-24, almost double the Rs 1.01 lakh crore in the previous fiscal year. This alarming rise, as reported by the Directorate General of GST Intelligence (DGGI), underlines the growing challenge in GST enforcement and the urgent need for more stringent measures to curb the trend.

The DGGI report identified online gaming and banking, financial services and insurance (BFSI) sectors as the most prone to GST evasion. The online gaming sector alone accounted for a whopping Rs 81,875 crore in evasion, while the BFSI sector recorded Rs 18,961 crore in evasion. Among commodities, the iron, copper, scrap and alloys sectors recorded Rs 16,806 crore in evasion, followed by pan masala, tobacco, cigarettes and beedi with Rs 5,794 crore, the PTI report detailed.

Capital of avoidance: Mumbai takes the lead

Mumbai emerged as the zone with the highest rate of GST evasion detection, with a total amount of Rs 70,985 crore, followed by Delhi with Rs 18,313 crore, Pune with Rs 17,328 crore, Gurugram with Rs 15,502 crore and Hyderabad with Rs 11,081 crore. This concentration of evasion in major metropolitan areas underlines the need to strengthen monitoring and enforcement measures in these regions.

A breakdown of tax evasion types showed that non-payment of tax, including illegal supply and under-declaration, accounted for 46% of cases, followed by false input tax credit at 20% and erroneous or non-reversal of ITC or blocked credit at 19%. These findings highlight the different methods used by companies and individuals to evade tax liabilities.

GST evasion has increased steadily since its introduction

Since the introduction of GST in 2017, detections of tax evasion have been steadily increasing, with the previous figures being Rs 7,879 crore in 2017-18, Rs 19,319 crore in 2018-19, Rs 21,739 crore in 2019-20, Rs 31,908 crore in 2020-21 and Rs 50,325 crore in 2021-22. This steady upward trend underlines the need for continuous improvement in GST enforcement mechanisms and implementation of robust anti-tax evasion strategies.

Signals of the need for more stringent regulations and law enforcement

The alarming rise in GST evasion, running at over Rs 2.37 lakh crore in 20,576 cases in fiscal 2024, has led to calls for stricter regulations and enhanced enforcement measures. Experts have stressed the importance of tightening regulations across sectors, especially the online gaming and BFSI industries, to prevent further losses to the state exchequer.

As the government works to address this urgent issue, businesses and individuals are urged to comply with GST regulations and contribute their fair share to the country’s economic growth. Effective implementation of anti-tax avoidance strategies and cooperation of all stakeholders will be crucial to curb this disturbing trend and ensure effective collection of GST revenue.