The GST Department utilizes various sources of information, including Form 26AS, Annual Information Statement (AIS), and Income Tax Returns (ITR), to verify income tax data and ensure compliance with tax laws. Here’s how these documents are used:
Form 26AS:
- Tax Deducted at Source (TDS): This form provides details of TDS deducted from various income sources like salary, interest, rent, etc. The GST Department can cross-verify this information with the TDS returns filed by deductors and the taxpayer’s ITR.
- Tax Collected at Source (TCS): 26AS also reflects TCS details, which helps verify tax collected on specific transactions like the sale of goods exceeding a certain threshold.
- Advance Tax and Self-Assessment Tax: Details of advance tax and self-assessment tax payments made by the taxpayer are available in Form 26AS, aiding in verifying tax compliance.
- High-Value Transactions: Information on high-value transactions like the purchase or sale of immovable property, shares, and mutual funds is included in 26AS, which can be used to identify potential tax evasion or non-compliance.
Annual Information Statement (AIS):
- Comprehensive Financial Information: AIS provides a broader view of a taxpayer’s financial transactions, including those not covered in Form 26AS, such as savings account interest, dividend income, and foreign remittances.
- Feedback Mechanism: AIS allows taxpayers to provide feedback on the information reported, ensuring accuracy and facilitating rectification of any discrepancies.
- Improved Compliance: By providing a comprehensive view of financial information, AIS encourages voluntary compliance and helps taxpayers file accurate returns.
Income Tax Returns (ITR):
- Declared Income and Tax Liability: The ITR filed by the taxpayer provides details of their income from various sources, deductions claimed, and the calculated tax liability.
- Cross-Verification: The GST Department can compare the information declared in the ITR with the data available in Form 26AS and AIS to identify any inconsistencies or discrepancies.
- Assessment and Scrutiny: ITRs are used for tax assessments and may be selected for scrutiny if discrepancies or red flags are detected.
Benefits of using these documents:
- Improved Tax Compliance: By cross-verifying data from multiple sources, the GST Department can identify and address tax evasion, underreporting of income, and other non-compliance issues.
- Data Accuracy: The use of multiple sources helps ensure the accuracy of income tax data and reduces errors.
- Efficient Tax Administration: These documents facilitate efficient tax administration by providing the necessary information for assessments, audits, and investigations.
- Transparency and Accountability: The availability of these documents promotes transparency and accountability in the tax system.
Overall, the utilization of Form 26AS, AIS, and ITR by the GST Department strengthens tax administration, improves compliance, and ensures a fair and efficient tax system.
Incidents Highlighting How the GST Department Actively Monitoring
Case 1: Pani Puri Seller from Tamil Nadu Received GST Notice
A street vendor selling pani puri in Tamil Nadu received more than 40 lakh in PhonePe transactions.
The GST department flagged these digital transactions, suspecting business turnover exceeding the 20 lakh GST registration threshold.
A GST notice was issued, asking the vendor to explain why GST registration and tax payment were not made.
Key Takeaway: The GST department is tracking digital payments (UPI, PhonePe, Paytm, GPay, etc.) and linking them to potential GST liabilities.
Case 2: GST Notice Due to Mismatch in 26AS and GST Portal
A taxpayer had TDS deductions reflected in Form 26AS on income from services.
However, this income was not correctly reported in the GST portal as taxable turnover.
The GST department issued a discrepancy notice, asking for an explanation and tax payment if applicable.
Key Takeaway: The GST department is matching TDS data from Form 26AS with GST returns to identify undeclared income.
Case 3: GST Notice Based on Income Discrepancy in 26AS
A taxpayer reported higher income in Form 26AS (as per TDS deductions) but declared a lower turnover in GST returns.
The GST department suspected GST underreporting and issued a notice asking for reconciliation.
The taxpayer was asked to justify the difference in declared turnover and income as per Form 26AS.
Key Takeaway: The GST department is using Form 26AS data (TDS details) to compare with GST turnover, ensuring all taxable supplies are properly reported.
Points to Remember while Reporting
- Do not report turnover more than Rs.20 lakh in IT Return if unregistered in GST.
- If you are unregistered in GST, then restrict UPI payment up to 40 lakh in case of goods and 20 lakh in case of service.
- Never over-report turnover in ITR for say loan purposes.
Taxpayers must ensure accurate reporting across GST and IT returns to avoid compliance issues.