Blockchain enabled GST Enforcement activities
Introduction:

The Department of Commercial Taxes are actively implementing GST in their respective State. Normally once a GST registration is obtained, the trail of entire taxpayers transactions of a GSTIN is of utmost importance for enforcement, assessments related activities. The vital information such as Registration, Amendments, Payments, Ledgers, Annual Returns of Taxpayers forms the basis for assessments to ascertain that appropriate Tax is paid in time and no dues, penalty is applicable to Taxpayers.

All returns filed by Taxpayers are normally self-assessed, but the Tax enforcement authorities need to ensure that all liable tax is paid to Government in time. It is also very important that essential information of Taxpayer assessments and orders passed is available readily till date to complete an assessment. Any enforcement activity requires ready availability of authenticated, immutable records pertaining to the tax payer.

In order to have this essential taxpayer information as authenticated, immutable, tamper free, Blockchain is the only suitable technology through which the desired objective can be achieved.

Blockchain use case for GST Tax Authorities:

The vital information which is usually needed by Tax authorities has been identified as follows:

Registration details, Annual returns, Payments & ledgers details, Notices served on tax payers under various sections of the CGST Act.

Registration details comprises Taxpayers registration information etc.

Returns – Annual returns in GSTR9, GSTR 9A, GSTR 9C and Final return GSTR 10 Taxpayer payments & ledger information which reflects the GST payments status of ledgers.

It is also necessary to know the Refund claims settled for Taxpayers.

The various Show Cause Notices & Orders issued under various sections of CGST Act will clearly reflect the nature of enforcement, assessments & prosecution activities initiated by Tax authorities.

The taxpayers involved in the exports of Goods & Services are normally granted outright refunds provisionally and also avail LUT from Tax authorities. A separate track of such Taxpayer information will improve service delivery.

Chronological trail of Eway Bill information on blockchain will help in tracking behaviour of GSTINs involved in inter-state transportation of Goods & Services

Right information provided in a timely manner to the right authorities, will bring effectiveness in entire gamut of the GST implementation and enforcement activities and plugging every gap arising due to unavailability of decision support ready information, thereby contributing to increase in Tax Collections, Recovery of tax liabilities, penalties etc.

All the above tailor-made datasets need to be maintained in the GST blockchain.

Dataset schemas will have to be tailor-made for the above areas of activity and are required to be captured in the replicated/ distributed GST Ledgers at the very source.

This use case is for Government, a Private Permissioned Distributed Ledger based GST Blockchain will be required to be built.

Why Blockchain for GST?

Blockchain based GST records will be immutable, tamper free as data can be appended-only. No modification, deletion possible thereby providing all stakeholder agencies with required information for day-to-day enforcement activities.

Stakeholders outside GST ecosystem such as other Government enforcement agencies etc can also have access to the blockchain enabled GST records.

Blockchain info can provide several views of same information with varying granularity and details based on the access controls defined

Durability, Reliability – Due to decentralised/ distributed networks, blockchain does not have central point of failure and better able to withstands malicious attacks. Greater security makes it more reliable.

Empowered stakeholders – Each stakeholder controls their transaction and information. Transaction authorisation is through Consensus.

High availability can be realised with Distributed ledger architecture

Stakeholders of GST Blockchain:

State Commercial Taxes Department
Central Board of Indirect Taxes & Customs (CBIC)
Enforcement Directorate
Directorate General of Foreign Trade
Various other Central and State authorities empowered

Accruing benefits with Blockchain based GST:

Transactions authorised by the Tax authorities empowered are written to the GST Blockchain. This single trusted source of taxpayer information is used for all further dissemination of information. There is no intermediate authority involved in this process of information access. Dissemination of information is seamless, transparent.

Different authorities need different information views with varying granularity, all such information-views dissemination can be made available easily.

“The GST Blockchain can act as a reliable source of information for Global Trade authority to confirm the exporter business profile in respect of Tax payments, Letter of Undertaking etc. Ready verifiability can improve business deals”