The Central Board of Indirect Taxes and Customs (CBIC) is mulling to merge its existing database of DG (Systems) with that of Goods and Services Tax Network (GSTN) in order to expand its coverage of taxpayer activities, and curb tax evasion, a senior official told FE. “The CBIC is likely to adopt GSTN as the prime database, starting the first week of June,” the official said.

At present, the common GST Portal developed by GSTN, is currently functioning as the “front-end” of the overall GST-IT ecosystem; and DG (Systems) is functioning as “back-end” that handles tax administration functions, such as refund, investigation, and adjudication by the tax officers. “From June, GSTN will function as the back-end as well,” said the official.

The exercise of merger is taking place mainly because the CBIC intends to curb tax evasion. In FY24, the Directorate General of GST Intelligence (DGGI) detected over 6,074 cases involving evasion of duty of over Rs 2.01 trillion. It is approximately 10% of total GST collection in FY24 with a voluntary payment of Rs 26,598 crore, which contributed to about 1.4% of total GST collections for FY24. In FY23, as many as 4,872 cases of GST evasion were detected involving evasion of duty of Rs 1.01 trillion, with voluntary payment of Rs 20,713 crore, as per official data.

Gopal Mundhra, partner at Economic Laws Practice said: “The proposed merger of GSTN and DG (Systems) will now result in seamless flow of taxpayer data within one integrated set-up (GSTN) rather than having a two-pronged approach for detecting tax fraud.”

The GSTN has been established as a uniform IT interface between the taxpayer,  Centre and states. It is responsible for maintaining the common GST electronic portal. Some of the functions of the GSTN include facilitating registration, filing of return, forwarding the returns to Central and state authorities, and computation and settlement of Integrated GST (IGST).

On the other hand, the Directorate General (Systems & Data Management), or DG (Systems) is set up to infuse technology in the departmental processes. It seeks to provide data support to the CBIC and field formations by compiling and disseminating data pertaining to tax collection and activities related to tax collection, such as adjudication, appeals, court cases etc.

The official mentioned above told FE that the merging of the two will help CGST officers and SGST officers to coordinate better, while tracking down tax evaders.

“Any issues identified by one authority (say central authority) can be swiftly identified by the other authority (say state authority) if the said details are made available in the database,” explained Shivam Mehta, executive partner at Lakshmikumaran & Sridharan Attorneys.

Moreover, as DG (Systems) is also responsible for managing the IT systems for customs operations, including data management for import and export activities, and overseeing the systems related to central excise duties, the merger would enhance transparency with respect to cross border transactions (imports and exports), which will enable the authorities to identify tax evasion such as discrepancies in valuation or tax rates applied to imports vis-à-vis domestic supply, say experts.

Tanushree Roy, Director- Indirect Tax, Nangia Andersen India said: The unified access to comprehensive and timely data will allow for more effective monitoring, advanced analytics and coordinated enforcement actions, ultimately leading to improved tax compliance, increased efficiency and reduced tax evasion.