GST Evasion - Cash Parchi system
GST evasion takes place through Kuchha bill books and cash dealings. Here, goods are supplied and payment is made against cash right down the supply chain. The cash parchi system starts mostly in the wholesale markets of India. Manufacturers, especially those in the organised sector, do not normally sell without bills or against cash. It is their distributors sitting in the whole sale markets who arrange the cash deals.
One out of four items are sold in cash but the parchi system does not carry the number of products as credits. It simply carries the amount due in cash in each transaction between two parties. Small bits of paper with numbers scribbled give the hint of how many Petis (lakh) or Khokas (crore) are due. The settlement takes place between the traders in cash usually after a week or a fortnight. It is this cash parchi system that needs to be squeezed out to ensure better compliance. more
One out of four items are sold in cash but the parchi system does not carry the number of products as credits. It simply carries the amount due in cash in each transaction between two parties. Small bits of paper with numbers scribbled give the hint of how many Petis (lakh) or Khokas (crore) are due. The settlement takes place between the traders in cash usually after a week or a fortnight. It is this cash parchi system that needs to be squeezed out to ensure better compliance. more
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There are always malpractices. It's also up to the buyer to resist buying from such unscrupulous sellers or report them to the tax authorities with a written acknowledged complaint. Even if some people complain and action is taken, it will have a salutory effect on the traders. I refuse to pay more than MRP for any packaged item. If they want me to pay more, I ask them to issue a bill with complete details. I have found that this works. more
Oct 24
Mr.Kapoor I will agree with you partially, yes most of smalltime sellers/retailers/traders specially in rural areas never give bills for the goods sold and when you demand they say if bill given tax is additional, specially in hardware,tiles,paints,garments sector and grocery business !! and people without knowing much say GST compliance is 100% but pl check rural markets and it is always without bill only !! yes awarness is increased but compliance is never followed !! more
Oct 24
And forgot to add Medical shops owned by individuals/clinics/nursing homes never ever give bills in almost all cities (big/small/metro both) more
Oct 24
The idea behind GST is to discourage cash/without invoice business. If the distributor is buying from the manufacturer against a tax invoice and then sells further down the chain in cash without issuing tax invoice, the distributor stands to lose the ITC which he paid on the purchase value because he is unable to report sales without tax invoice to support it and claim set-off of ITC. In many cases, the GST component is as high as 12%, 18% or even 28% of the purchase value. I would think that it's not possible to recover this loss from the buyer who is paying cash to the distributor. Even if the cash buyer compensates the distributor for the loss of GST ITC, the saving would be very small i.e. the GST on the value added. Usually, the distributor margins are very small e.g. 5%. So the saving to the cash buyer would be e.g. 18% on 5% i.e. less than 1%. I am not sure whether this is sufficient incentive to avoid paying tax and creating all sorts of accounting problems and getting into trouble with tax authorities. more
Oct 24
I fully agree with Mr.Kapoor's observations.In the recent past,3out of 4 places where,I intended to pay through the credit card or cheque,the concerned trader asked me either to pay in cash or pay an additional amount since the trader has to pay GST.In one of the recent purchases of inverter battery,even on paying the cash when I insisted on taking bill, the concerned shop gave me a bill with a different owner.No GST number was mentioned on the bill.I am not sure,if traders have fake bills also to evade paying GST to govt even after collecting from the consumers. more
Oct 24
In a market, when there is product monopoly & it's seller's market, the seller may not be interested for input tax credit (ICT) and can charge a fancy price and buyer pays, then where will be GST?? more
Oct 23
Sir is there any official chat platform where consumers, traders or any body can interact with GST experts to know the correct answer to their individual problems. I unferstand govt has opened such platform for income tax department. more
Oct 23
