A STUDY OF IMPORTANT MEASURES TO PREVENT TAX EVASION IN VAT

Authors: Dr.Vaibhav Modak, Dr. Suresh T. Silawat

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Abstract

In this paper we studied about the effective initiative that has been taken by the Finance Department of Madhya Pradesh, State Government to prevent the tax evasion of the traders liable to pay tax under value added tax policy which is implemented from 1st April 2006 in Madhya Pradesh. To avoid and make a proper control on the tax evasion VAT Audit is being introduced. Tax evasion means illegal wrongful commercial activities, in which tax payers used to misrepresent their sales or dishonestly hide the facts of business activities or declare the less sales to reduce the tax liability. We have discussed about the proactive arrangements and systems made under the Value Added Tax policy to reduce the cases of tax evasion.

Introduction

For the effectiveness of any tax administration it is very necessary to take a strong proactive action of audit or enforcement. If the tax audit is poor then tax administrative will be a failure. Other methods like identification of the persons who are not presenting the proper return and not depositing the tax at right time, all performed efficiently but if the audit work is not strong then the habit of not depositing tax at proper time converted into tax evasion. There are various ways by which a trader can involve in tax evasion. Tax fraud is a common thing that rises due to manipulation in documentation. This type of activity comes under fraud or crime. Another type of tax evasion is related with under reporting in which a trader used to show his sales low for reducing the tax liability. Tax avoidance means those traders who use loopholes in tax laws & not pay the amount of tax or linger it. Audit is a depth checking & scrutiny of purchase- sales as well as input tax rebate and other statements which are declare by the trader in submitted return. Audit assures the validity of statements & facts, prescribed rate for determining tax amount and matching it with the records and accounts books. If any trader or businessman involves in tax evasion then checking of such trader will be applicable under the enforcement procedure.

Conclusion

After the study of above data it is concluded that for making a strong hold over tax evasion, tax department involved sincerely & tried best measures for preventing it. Under the VAT the check post installed for checking of the transacted goods. Checking of commercial goods on points of loading and unloading and system of inspection well implemented. All the dealers irrespective of their turnover and tax liability will be subjected to self assessment declared in the return by them. VAT policy considered the fact that “The first objective of the tax administration is to collect the tax not to create a complicated environment for the tax payers”