One wedding, several PANs: I-T’s watching

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What is common to hotels, brands, luxury brand retailers, designer apparel and even IVF clinics? Well, if you have incurred any expenditure in excess of Rs 2 lakh at these places and more, you have to report them to the Income Tax department. Sale and purchase of goods and services in cash have to be documented in form SFT-013. The onus is on the seller, The Economic Times has reported.

Driven by the need to further boost the buoyant tax collections, the Central Board of Direct Taxes (CBDT) has decided to go after unreported and underreported ‘high value consumption’ this year.

The CBDT’s action has been galvanised after it has reportedly got the intelligence that there has been large scale violation of its provisions. According to the report the IT Department wants to verify consumption expenditure with the taxpayer’s profile and information that is already available with the department.

“Considering that IT and the related service sectors are adversely impacted post-Covid in view of multiple local and global developments, the government is trying to leave no stone unturned in widening the taxpayers base by tapping the sectors that have seen unprecedented boom and super profits after the extraordinary pandemic situation on account of heavy spending (termed widely as revenge spending) as a one-time opportunity,” said Rahul Garg, managing partner of tax and regulatory consultant Asire Consulting.

He emphasised that the implications are clear: “While the individual spenders would have to be more cautious in their tax filings now, these sectors would need to be prepared for a greater scrutiny both in terms of corporate tax or withholding tax perspective and the need for strong documentation in place.”

One of the big spending tactics that are becoming common could attract the focus of the CBDT is the trend of splitting high-value transactions between more than one PAN card. “Wedding and big social events where PAN (Permanent Account Number) details are split between families on high-value transactions will get hit with this move,” said Garg.

Some experts are lauding the move by the CBDT. Amit Maheswari, managing partner of Ashok Maheswari & Co described it as “pragmatic and smart”. He thinks by reconciling high-value expenditure and discrepancies between spending and reported incomes, under-reporting of income and possible tax evasion can be detected.

Executives of luxury brands told the newspaper that buyers often request them to split the bill to avoid revealing tax details. Interestingly, shopping mall owners/operators have the details of luxury/high-value transactions since they have revenue-sharing details. That’s one source from where CBDT can source data on consumption.