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The Comptroller and Auditor General (CAG) has suggested to the Finance Ministry that a proper system should be put in place to identify high-risk taxpayers who may exceed the turnover limit in the GST composition scheme.
Having said that, this exercise should be done regularly and verified from other sources including third parties. Also, the sales value figures declared by the taxpayer should also be checked to ensure that tax evasion is not taking place. Based on a review of 8,66,000 composition taxpayers under the central jurisdiction between financial years 2019-20 and 2021-22, the federal auditor found that the proportion of GST taxpayers exceeding the turnover threshold for the Composition Levy Scheme (CLS) was significant. These high-risk taxpayers were identified based on an audit of data present in GST returns such as GSTR-4A, GSTR-7, including third-party data sources such as income tax returns, vehicle databases, etc. The benefit of the GST composition scheme is given to taxpayers whose turnover in the previous financial year does not exceed Rs 1.5 crore. For taxpayers in special category states, this threshold is Rs 75 lakh.
Non-eligibility of the declared sales figures to continue as beneficiaries of the scheme and the applicable rules for availing CLS are the two factors that are the main risk areas under CLS, Kag said.
The scheme is intended to prevent misuse
Taxpayers whose annual turnover is less than Rs 1.5 crore are eligible to benefit from the GST Composition Scheme.
Based on a review of 8,66,000 composition taxpayers, it was found that a significant proportion of GST taxpayers exceeding the turnover limit for Composition Levy Scheme (CLS) fall under high risk.
Non-eligibility as per the declared sales figures and the rules applicable for availing CLS to continue as beneficiaries of the scheme are the two factors that are the major risk areas under CLS.
CAG has suggested to the Finance Ministry that a system should be developed under which such ineligible taxpayers can be identified and action can be taken against them.
