One of the key advantage that government has been voicing in support of GST is ‘curbing black money’ circling in India. Selling of goods under ‘kacha bill’ or invalid invoice is one of the prominent source of introduction of black money in economy.
While the PM may have breathed a sigh of relief, the trading community isn’t on board just yet. The experts are equally doubtful. The PM said in the Parliament, “The ‘kacha bill’ and ‘pakka bill’ system in our country has helped mobilise black money. GST will help put an end to this.”
Before understanding the impact of kacha bill and pakka bill, let’s understand basics:
What is ‘kacha bill’?
Kacha bill is a temporary bill issued by vendor but is not recorded in the books of accounts and neither disclosed for tax purposes.
What is ‘pakka bill’?
Pakka bill is a proper bill and the transaction is mentioned in the books of accounts. Also, vendor charges applicable taxes to customer on the invoice and pays them to government.
Why ‘kacha bill’ won’t go out of market despite GST?
The trading community isn’t all gung-ho about GST helping in tapping this black money source. “There is a general perception that traders don’t issue pakka bill, which is wrong. There are instances where a trader didn’t give pakka bill to a customer, but in large number of cases customers avoid taking it, because they would have to pay tax at 12.5 percent rate on the goods they purchased. Even, government officials don’t take bills against the purchases they make, so as to avoid paying tax,” said Praveen Khandelwal, secretary general, Confederation of All India Trades (CAIT).
Additionally, chagrining taxes increases the price of the goods making vendors loose out on competitive market.
“It’s very difficult to prevent this trend of issuing fictitious bills. It’s a common practice with builders, who accept major portion of the price of a house in cash and no receipt is given to the consumer. Unless strict measures are taken to prevent black money generation, such practices will continue. Traders continue to remain out of tax net through kacha bill,” remarked Arun Kumar, economist and retired professor, Centre for Economic Studies and Planning, Jawaharlal Nehru University.
“Even, computerisation can’t prevent fudging of accounts. We’ve seen it in India’s biggest accounting fraud Satyam case, where fictitious fixed deposits worth Rs 6,000 crore were created by manipulating the software. So, it can’t be claimed that the GST regime will completely stop black economy,” he added.
However, given the robust compliance structure inbuilt under GST law, it will only be fair to say that unaccounted transactions won’t be easy to live by in future.