Soft tax nudges, no scare tactics: Govt

CBIC to match GST, I-T returns, focus on excess tax credit use

- Gireesh Chandra Prasad

India's top indirect tax body wants to strictly avoid aggressive enforcement, preferring a "soft nudge" approach to encourage tax compliance instead. Alongside, it will tally income tax returns with goods and services tax (GST) returns to check for potential mismatches, and watch out for an abnormal use of input tax credits to check evasion.

Tax officers should avoid going on an overdrive with any single enforcement method or sending premature notices that create fear among businesses, Central Board of Indirect Taxes and Customs (CBIC) chairman Sanjay Kumar Agarwal said. The message comes in the context of some of the states leveraging digital transaction data to send tax notices to small vendors, leading to a backlash.

"I think there should not be any kind of overdrive on a particular method like payments which are received through unified payment interface (UPI). While there's no harm in taking data, its use in follow-up actions should be very carefully calibrated. Notices should not be sent immediately, even for seeking explanations, as this creates a scare in the entire segment", Agarwal said in an interview.

Vendors in Karnataka protested in July after state tax authorities issued notices as digital payments received by many of them exceeded the sales threshold for GST registration.