GST Refund: No Proper System of Review and Post-Audit to Rectify Mistakes, says CAG [Read Report]

GST Refund - CAG - taxscan

The Comptroller and Auditor General of India (CAG), in its report on Indirect Taxes, stated that there is no proper system to review and post-audit to rectify the mistakes in granting refunds even after four years of implementation of GST.

The report has stated that “timely refund processing facilitates the taxpayers by providing much needed liquidity and cash inflows. Audit examined GST refund cases processed and paid by the Central tax authorities pertaining to the period from July 2017 to July 2020. During the course of examination of records, Audit observed certain systemic and compliance issues in relation to grant of refund by the Department, which need to be addressed.”

The report further observed that “there exists a mechanism to match ITC availed by a taxpayer with the GSTR-1 returns filed by the suppliers and to identify fraudulent cases through data analytics after the amount has been paid. However, adequate systems were not in place to prevent and mitigate refund related frauds by using real time/near real time data analytics so as to alert the tax officials before sanction of refunds.”

Audit analysed the data of Public Financial Management System (PFMS) relating to GST refunds pertaining to the period from July 2017 to September 2019 (Pre-automation) received from 34 Commissionerates and followed it up with substantive audit of the payment process. Audit noticed 410 instances of double payments owing to lack of reconciliation and monitoring by the Department amounting to ₹ 13.73 crore.

“Even after four years of implementation of GST, a proper system of review and post-audit of refunds had not been effectively institutionalized so that the Department may rectify mistakes in time,” the report said.

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