Data analytics at work to improve gst

Data analytics at work to improve gst

The Goods and Service Tax Network’s (GSTN) move to autogenerate input tax credit (ITC) certificates is welcome. The statement, called GSTR 2B, gathers information from returns filed by suppliers and collates the tax paid on supplies to a particular entity. This entity now can safely claim ITC for this amount, and reconcile the amounts credited with the taxes paid on purchases, and follow up with vendors who have not filed their returns.

With a summary of the ITC available as on the date of GSTR 2B’s generation, it will ensure that no credit is taken twice. Deploying information technology capability to generate such data for every registered GST payer, based on the their suppliers’ filings, is administratively efficient as well. It shows the potential of the system to practically universalise coverage if and when reverse charge is made universal. Under reverse charge, when a vendor who is too small to be required to register under GST and would find the paperwork cumbersome, supplies a good or aservice to a firm that is registered under GST, the buyer pays the GST due on that supply directly to the government, instead of adding the levy to the payment made to the vendor, expecting the seller to deposit the tax, and claims credit for the tax so paid when he pays the tax due on his supplies. This would allow even small suppliers to be brought under the tax net (they can be identified by the income-tax department’s Permanent Account Number or Aadhaar), and prevent their exclusion from procurement by buyers who want to avail of ITC.

Information technology capability makes the matching of invoices and returns eminently feasible. Reverse charge would allow small companies to build books of accounts they could leverage to seek formal credit, without the paperwork of GST.