GST System prone to ITC frauds due to complexity in compliance system, says CAG Report [Read Report]

GST System - GST - ITC frauds - compliance system - CAG Report - Taxscan

The Compliance Audit Report of the Comptroller and Auditor General (CAG) of India on Goods and Services Tax said that GST System prone to Input Tax Credit (ITC) frauds due to complexity in compliance system.

The CAG report said that owing to the continuing extensions in the roll out of simplified return forms, and delay in decision making, the originally envisaged system-verified flow of ITC through “invoice matching” is yet to be implemented and a non-intrusive e-tax system still remains unimplemented.

The GST return system is still a work in progress despite more than three years of GST roll out. In the absence of a stable and simplified return mechanism, one of the main objectives of roll out of GST i.e. simplified tax compliance system is yet to be achieved.

“CBIC has yet to put in place an effective system of scrutiny of returns based on detailed instructions/manuals for the tax officers. As a result, an important compliance function of the department, as mandated by law, is yet to be effectively rolled out even after three years of GST implementation,” the report added.

It verified 5,822 out of 77,363 transitional credit cases in 81 Central GST Commissionerates and five Audit Commissionerates, and noticed 1,182 instances (20 percent) of non-compliance.

The report examined the records relating to 4,736 refunds out of 23,106 in 33 CGST Commissionerates and  noticed non-adherence to extant provisions in processing of refunds in 280 claims (6 percent) involving an amount of Rs.16.16 crore.

“During the period October 2018 to March 20205, we examined the records relating to 4,736 refunds out of 23,106 in 33 CGST Commissionerates. We noticed non-adherence to extant provisions in processing of refunds in 280 claims (6 per cent) involving an amount of ` 16.16 crore. We observed instances of irregular grant of refund due to non-consideration of minimum balance in electronic credit ledger, irregular sanction of refund of input tax credit availed on capital goods etc,” the report said.

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