The culture of tax evasion in India

Anil Tripathi explains how most people evade taxes in India.

I went to a wood store and bought some plywood worth Rs.20,000/-.

The shopkeeper writes something on a small piece of paper, which he calls a bill and gave it to me.

I asked for a proper bill. He said “A proper bill means 12.5% VAT”, which counts up to: 12.5% of 20,000 i.e. Rs.2,500/-. The shopkeeper motivates me to evade a VAT of Rs.2,500, whereas he plans to evade Income Tax of approximately Rs. 1000/- on a sale of just Rs.20,000/-. This means a total revenue loss to the state was of Rs.3,500 approximately on a small sale of Rs.20,000.

This example is just an incident from a shop in a small city; just imagine the big picture, where a Revenue loss of millions is taking place just because WE DO NOT ASK FOR A BILL. Here we must not generalize that every shopkeeper or seller is the same but in present scenario, everyone thinks that tax evasion is a smart way of making money.

This example is from a sweet shop.

Again for the realization of a big picture and our unawareness that lead to a loss of millions of rupees every day.

I bought some sweet worth Rs.240 and some snacks worth Rs.52.

The shopkeeper did not gave me the bill. According to the taxation system, sweet has applicable VAT rate of 5% i.e. Rs. 12 on a sale of Rs.240 and on snacks the VAT rate is 14% i.e. Rs.7 on Rs.52. On a total sale of Rs.292 the state suffered a revenue loss of Rs.19. Suppose 2000 people go to this shop and make the same purchase as mine, then it is a total loss of Rs. 38,000 every day and this is just a VAT evasion. I have not included Income Tax evasion here. Just by the VAT amount from that particular shop if properly paid, can give employment to 114 people with Rs. 10,000 salary per month just to clean that area. If a market is clean without rubbish and dirt then it will certainly improve the business as well.

It is commonly seen especially on a sweet shop that when you ask the price of a sweet, the shopkeeper will tell you Rs.240 per kg. If you take the bill it will say, “Sweet Price: Rs.228 per kg and VAT: Rs 12”. This clearly means that he is taking VAT from us on every sale but that VAT goes into his pocket when we don't take a bill.

This example is when I went to buy some vegetables. There were some vendors sitting on a government land and were selling vegetables and other stuff. Apparently that place was full of dirt and garbage and full of Vegetable vendors.

I went up to a vendor and asked him “You must be earning around Rs.500 to Rs.1,000 everyday, isn't that right ! Then why don't you all contribute and hire someone to clean this place?” After listening to this, the vendor got very angry and replied

“Sir, what do you think ? I make profit of rupees 3,000 everyday just by selling these vegetables. Morever, I sell flowers worth rupees 10,000 everyday and recently I have sold my land for Rs.4 Crores”.

I congratulated him and asked him, “It is good that you are earning well and use all facilities provided by the government. viz. schools, hospital, streets etc. You get everything from this country and in return, what do you give to your country ?

Answer – Nothing except extra dirt and garbage.

The person who is living in this country; getting prosperous in here; utilizing all the resources of this country but doesn't want to give anything to his country in return and even expecting that everything will be fine on its own.

I was invited at a religious function and the host of which was a businessman.

I saw people were calling him 'SETH JI' and I was told that he had donated Rs.200,000 in the temple along with 500 blankets

to the poor people. He also arranged a feast for 1000 people.

I asked him “How did you donate money in the temple, by cheque or by draft?”

He replied “If I had donated through cheque or draft, my white money would have got affected. I therefore had to pay by cash.”

Not only this, he didn't take a bill for the blankets and also paid in cash to the caterer to save VAT amount.

This means that the money he evaded from tax and gave in the temple was called 'DONATION' and the same person is treated with respect in spite of the fact that he has robbed nation's wealth by doing so. He is a Traitor but surprisingly our society calls him Seth Ji instead.

Recently I wanted to buy a property in Jaipur.

I saw an advertisement in a newspaper about a house. The cost of the house was Rs.38,00,000 The builder said “I will accept only Rs.13,00,000 through cheque. Rest you have to pay in cash.”

On asking the reason, he said for a receipt over Rs. 13,00,000, will be called Income and he will have to pay tax on that amount, which he doesn't wish to pay.

This incident is just one example. I visited around thirteen builders and except one builder, all others were not interested in paying any tax to the government. Anywhere you go; there is a loss of millions every day to our Government because we lack transparency in the property business.

In the real estate business, majority of people evade not only income tax but also the stamp duty that too without any trouble.

You go to any shop and on asking for bill you will get one of the two replies –

“Do you need a proper bill ?” or “If you take a bill, you need to pay extra tax .”

Here you should understand that by not giving you a bill he is not willing to save your tax money but he is more interested in saving his Income Tax and extra effort of keeping proper accounts.

I went to buy some Granite. I checked out around 10 different stores to get the best quotation and a proper bill.

My search ended at a “Limited” company.

I asked the manager “I need some Granite but I also require a bill for the purchase.”

Manager replied “Yes of course sir, we shall provide you with bill, we don't do anything without bill.”

I was happy to see that I found a right place. I chose granite which was available at the rate of Rs. 150 per sq ft. I wanted to buy 100 sq. ft of Granite.

On seeing the bill, I was shocked. The Bill said “Granite at the rate of Rs.27 per sq ft.” whereas I was charged at the rate of Rs. 150 per sq. ft.

I asked the manager about it.

He replied “Sir, we cannot provide you a bill of more than Rs.27 per sq ft as we have not yet issued any bill more than this since beginning.”

I was very annoyed to see an open cheating of the country's revenues right in front of my eyes.

He asked me “Are you new to this country ? This is INDIA, here everything is allowed.”

I had to return without buying any Granite.