Modernizing Retail Trade Is the Only Way to Check Tax Evasion in India

Delhi, September 7, 2015 (Newswire.com) - The detection of VAT fraud by Delhi government being carried out by the commodity traders in Delhi points to a very large malaise of tax evasion and tax fraud in our country - India.  Traders have devised ingenious methods to avoid paying taxes that they have collected or will collect from consumers.  Delhi government detected illegal warehouses being run in neighboring states of Delhi, where approximately 100-200 traders having turnover between Rs. 200-600 crores annually were storing goods for sale in Delhi to avoid paying VAT, which they were collecting from consumers.   This points to a tax evasion at an average of Rs. 500 crore annually by this method only.  Cash transactions, manual billing, and without bill goods are other methods whereby Tax is being evaded. 

It is safe to assume that at least 50% of the VAT collected is never paid to the government.  The money that is so collected is pocketed by wholesalers and retailers in every product category in our country, in effect most consumers are paying on an average 10% extra in the name of Taxes which never reaches government.

Manish Sharma, Managing Partner, India Opportunity Advisors says "It is baffling to note that a country suffering from cash crunch, due to widespread and massive tax evasion, which in turn is affecting development, the government is stonewalling e-commerce which has a potential of not only modernizing retail trade, but increasing tax collections at all levels."

Manish Sharma, Managing Partner

It is time the Prime Minister Narendra Modi led government made everyone accountable and collected taxes from the wholesalers and retailers who have collected taxes from public.  Government should make policies that makes the whole transaction chain electronic and traceable.  All goods that are being bought and sold in the country should be barcoded and traceable at every level.  Any trader who conducts transactions of more than Rs. 10 Lakhs annually should be mandated to have an electronic Point of Sale, like the ones sold by HP and IBM, so that governments can trace back transactions and audit the traders if required. 

Considering that the e-commerce companies are already doing end to end electronic tracking of transactions which can be audited and traced, government should promote e-commerce to rein in errant tax evaders by opening e-commerce to every segment and without prejudice. 

Manish Sharma, Managing Partner, India Opportunity Advisors says “It is baffling to note that a country suffering from cash crunch, due to widespread and massive tax evasion, which in turn is affecting development, the government is stonewalling e-commerce which has a potential of not only modernizing retail trade, but increasing tax collections at all levels.”  

Modernizing retail trade and bringing in accountability and traceability at every level is the only way India can increase tax collection and fund the infrastructure development that is so much needed.