GST Sleuths Tracking Merchants Skipping Tax via Digital Payments

The rapid growth of digital payments has also increased the scrutiny on tax evasion by online merchants using payment aggregators.

The directorate General of Goods and Service Tax Intelligence (DGGI) is working closely with startups, payment aggregators and payment gateways to monitor if merchants are selling the right products with the right GST invoices.

Tax evasion is very common among small merchants, where they would enlist as a seller of one product which attracts GST at a lower slab, but engage in selling other products which attract higher GST, the tax authorities intend to catch such merchants.

The government is cracking down on such errant merchants and the Reserve Bank of India wants payment aggregators to heighten their vigil on their clients.

A top executive at a fraud detection platform pointed out that typically platforms are seen to enlist as a laundry service or an ecommerce portal, but after a few months start offering betting services or gaming services and such. The advantage is that a laundry service will attract a much lower GST compared to a betting service.

Authorities need to keep track of such developments and monitor if the right taxes are being paid by the merchants.

While payment aggregators undertake a mandatory due diligence on the merchant at the time of on-boarding, industry insiders said that continuous monitoring is something that is still lacking in the industry.