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Tax Authorities To Intensify Scrutiny On High-Value Expenditure In Luxury Sectors
Central Board of Direct Taxes' Action Plan Targets Hotels, Luxury Retail, and Designer Brands for Closer Inspection
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Tax experts and industry insiders predict that the Central Board of Direct Taxes' action plan for fiscal 2023-24 may lead to increased scrutiny on segments like hotels, banquets, luxury retail, and designer brands. According to the plan, transactions exceeding Rs 2 lakh in cash must be reported on form SFT-013 by the seller, as there has been a noticeable circumvention of this provision.
The central action plan outlines the need to verify high-value consumption expenditures with taxpayer information available to the department. It aims to identify possible sources involved in circumventing the provision, such as hotels, banquets, luxury brand retailers, designer clothing stores, and IVF clinics. A non-intrusive verification exercise could be conducted to ensure compliance.
Industry experts believe that the government is keen on expanding the taxpayer base, especially after the pandemic-induced surge in sectors experiencing "revenge spending." As a result, individuals and sectors, particularly IT and related services, may face increased scrutiny and need to maintain strong documentation for tax compliance.
Hotels and banquets have already experienced heightened scrutiny in the past year, and this trend is expected to continue. Social events and weddings, where high-value transactions are split among families, could be impacted by this move.
The tax department's approach has been termed "pragmatic and smart" by experts, as analysing various data sources related to high-value expenditures can help detect discrepancies between reported incomes and actual expenditures.
Luxury retail may also come under the spotlight, as some shoppers request retailers to split bills to avoid sharing tax details. Mall operators are vigilant about products with values exceeding Rs 2 lakh, thanks to revenue-sharing agreements.
With these measures, tax authorities aim to ensure greater tax compliance and deter tax evasion in high-value expenditure segments.