Digital transactions, crypto, etc prone to significant GST revenue leakage, says DGGI

Even as the Directorate General of GST Intelligence (DGGI) has detected GST evasion of over ₹2 lakh crore in FY24—the highest in a single fiscal), There is still substantial revenue leakage in the system, which remains unplugged.

In a freewheeling exit interview on September 30, while demitting his office, Gupta told CNBC-TV18 that these areas are prone to significant GST revenue leakage, and the anti-evasion agency faces many challenges in tracking them to ensure minimal leakage. He emphasised that “upcoming policy decisions and the new DG of the DGGI should look at these sectors to plug GST leakage.”

“Transactions from these sectors are difficult to track as a lot of the data is stored in the cloud; it becomes difficult for us to track, and there is a need for more attention to this side of the transactions as a lot of evasion remains uncovered.”

He noted that “apart from this, traditional areas such as gutkha, pan masala, timber and plywood, metals, alloys, and scrap too are difficult to track.” Gupta explained, "Since these goods are consumed directly by the consumer, no proper records are maintained by the sellers, and whatever records we get are of a day or two, which becomes a challenge and needs attention.”

According to the recent annual report on evasion and trends released by DGGI for FY24, the investigation arm of GST—DGGI—has detected 6,084 cases involving ₹2.01 lakh crore of GST evasion in the 2023-24 fiscal year, with online gaming and BFSI in services, and iron, copper, scrap, and alloys in goods emerging as the sectors most prone to evasion.

In 2023-24, the online gaming sector saw maximum evasion with ₹81,875 crore in 78 cases, followed by BFSI with ₹18,961 crore in 171 cases. Works contract services and pharmaceuticals had 343 and 22 evasion cases, respectively, with tax evasion involving ₹2,846 crore and ₹40 crore.

In 2023-24, 1,976 cases of Goods and Services Tax (GST) evasion were detected in the iron, copper, scrap, and alloys sectors, involving ₹16,806 crore of tax evaded. Pan masala, tobacco, cigarettes, and bidi came next, with 212 cases involving an evasion of ₹5,794 crore. Plywood, timber, and paper had 238 cases involving tax evasion of ₹1,196 crore. Electronic items saw 23 cases (₹1,165 crore), followed by marble, granite, and tiles with 235 cases (₹315 crore).

When asked whether the agency sees an influx of cases during elections and about the allegations often levelled against the agency and its officers regarding harassment and extortion from taxpayers, Gupta shared his thoughts, stating that the government is taking all sorts of steps to ensure no such claims can be made.

“There is a clear message from the top government to ensure there is no harassment or extortion during raids, etc. Recently, guidelines have been put in place regarding the rights of a taxpayer. A grievances redressal committee has been formed, and all complaints against officers are taken very seriously,” Gupta said.

Regarding the influx of intelligence inputs during elections, Gupta noted that “be it state or general elections, like any other investigative agency, the flow of information increases, and raids increase. I cannot share which are the top states where maximum evasion takes place. But for instance, J&K and Haryana elections are currently underway, and the action increases during this time. Goods where we see evasion during elections include FMCG, goods promised as freebies, and domestic use items, etc., where we see more evasion.”