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GST increased illegal activities 4-5 times in terms of billing

Chennai: The goods and services tax (GST) introduced to track the trail of transaction has in fact increased illegal activities in terms of billing by multiple times. ‘Bill selling’, a practice common in the construction sector among those who inflate cost of projects, has gone up four-five times after the launch of GST.
In case of ‘bill selling’ a dealer or a distributor would buy the goods from a construction material manufacturer paying taxes and would get a proper bill. This bill alone is then sold to a private builder or a government contractor who wants to inflate the cost of his projects.
The builder would have bought the products from some other manufacturer for a lesser price or without a bill. He would pay four-five per cent of the amount to distributor for the bill.
Now, the distributor can sell goods to the retailer without a bill and without charging tax. By selling the goods upfront for cash to the retailer and buying them from the manufacturer for credit, the distributor can also earn some additional margin by giving the cash for short-term lending purposes in the unorganised credit market. “This practice was there in the earlier tax regime too. But it has increased four-five times after introduction of GST,” said an electrical goods manufacturer.
“Earlier, bills were che­cked at the state check-posts and hence such practices were contained within the state. Now bill selling happens inter-state and inter-city. While introducing the new tax regime, the government removed the existing checks and balances. But they have not introduced new checks that can curb such practices,” he said.
As per GST, the taxman can trace the entire trail or transactions. But the government has not started or put in place the infrastructure to crosscheck input and output tax and hence the malpractice is continuing unabated.
“Earlier this used to happen largely with the local manufacturers and now such dealers and distributors are using our bills in a big way as well. As a consequence, our products are available at different markets across the country at different price points,” said a manufacturer of a well-known brand of construction goods. “Some of the retailers, who were getting goods from us after paying GST, are now getting them from such dealers for a better price. Such goods are also freely moving across the states,” he added.