As per various report, the government of India might not be implementing the reverse charge mechanism in order to work along Good Services Tax (GST). Reverse Charge Mechanism—a tax evasion measure, was less likely to proven significant enough for revenue generation to several business.
Meanwhile, some reports stated that substitute mechanism has been planning to restrain tax evasion. The reverse charge mechanism is a process where, the entities are allowed to buy goods from small unregistered dealers under payment of tax on behalf of latter.
On a various issues a senior government official said “We have to see till what extent it will help us in checking the tax evasion vis-à-vis revenue that it brings. Reverse charge mechanism may not detect too much tax evasion. It will make only a minor difference. As against that, the hassle it will create for small businesses is far more.”
Further the official also stated that under GST around one percent of 11.2 million taxpayers pay on an about 80 percent of the taxes. Thus, the anti-evasion measure will more or less harass more than 9 million dealers.
The government, however, is concerned about the benefit of implementing the mechanism and thinks that it may disrupt small businesses without bringing any significant rise in revenue collections.
In such situations, it’s not better to implement reverse charge mechanism, said official.
According to government insight, it is been more concerned on implementing such mechanism which has more potential to make significant increment in the revenue structure of the businesses.
Whereas, reverse charge mechanism has witnessed delay several times in the year 2017.