Connecting the Dots Between GST & Income Tax
Goods and Services Tax is set to revolutionize the way we Indians do our business. Many experts and media channels have carried out in-depth studies on what changes GST is expected to bring.
I myself have been writing extensively about Goods and Services Tax. One thing that surprises me is lack of basic awareness among the business community and to some extent the tax consultants as well.
So far, we have carried our business in a manner wherein our tax filing information use to differ from what we use to furnish in our Income Tax Return. This was due to a difference in the fundamentals of both VAT and Income Tax.
Income Tax is governed by Central Board of Direct Taxes (CBDT) which falls under Central Government, on the other hand, VAT was governed by State Commercial Tax department which falls under the control of State Government. Now in most of the cases, there used to exist a difference between the stock we declare in VAT return and the stock which we declare in our Income Tax Return. Profit and Loss Account for the purpose of Income Tax is drawn in such manner that amount of Tax Payable is determined first and accordingly, stock levels are shown.
Now comes the poster boy of India Tax Reform – GST.
Under this new regime, Central Government will have information of both stocks under GST and Stock furnished under Income Tax Return. Further GSTIN which is unique identification number under GST is linked to business PAN which is unique identification number under Income Tax.
Connecting the dots is no rocket science, if these authorities find any difference, businesses may expect notices under GST or Income Tax wherein there is a tax liability.
This situation is going to affect a large number of small and medium businesses, HOWEVER, We don’t see any news article or PR Story or Research Paper around this situation.