Taxpayers panic over GST red-flag reports

New Delhi: Many GST taxpayers, especially small firms, are a worried lot these days with authorities sending system-generated red flags in their online return forms.

A Delhi-based GST practitioner said that taxpayers are given very little time to respond to the red flags, creating panic among the assessees.

"The assessees are always scared of any communication coming from the tax authorities. The red-flag reports are so detailed and long that any person would get panicked," said Rajat Mohan, Senior Partner, AMRG & Associates.

Sources said that the red-flag reports are very detailed and highlight discrepancies across various parameters. The reports highlight unreconciled items, non-compliance and deficiencies in the digitally-filed documents.

Now that businesses have started filing their annual returns and reconciliation reports, the number of red-flag reports for the assessees have jumped.

"Our experience is that wherever such incidents have occurred and assessees have approached the authorities, they have been very responsive," said Amit Bhagat, Partner, Dhruva Advisors.

"There are examples where authorities have been very helpful but there are situations where there are actually no remedies either because of system related issues or the problem is unique," he added.

Tax experts, however, hope that the government will not penalise taxpayers for their genuine mistakes. A senior executive of a chartered accountancy firm expressed worry over so many red-flag reports being sent to assessees, saying the possible reason for this could be year-on-year decline in GST collection.

"Since the collection has dropped, the department wants to scrutinise more cases. They have probably developed a system under which red flags would be immediately developed after a mismatch between GSTR-3B form and GSTR-1 or maybe mismatch between e-way bill and GSTR 1," he said.

With GST collection remaining tepid, the government has directed its focus on compliance. Acting tough on non-filers, the Mumbai zone of the indirect tax department recently asked field officers to cancel registration of firms for not complying with return-filing requirement.