GST compliance deviations in Jammu and Kashmir cost ₹439.36 crore, CAG finds

This audit examined the Union Territory of Jammu and Kashmir's revenue receipts, specifically focusing on the E-way Bill system under Goods and Service Tax (GST) and the department's oversight of GST payments and returns filing for the period ended March 2023.

Who it concerns: Government of Union Territory of Jammu and Kashmir (Finance Department/State Taxes Department)

What the auditor found

• Systemic lapses in the E-way Bill system, including ineligible taxpayers continuing under the Composition Levy Scheme and taxpayers filing nil returns despite generating E-way Bills, involving a tax implication of ₹2.29 crore.
• Three taxpayers generated 5,739 E-way Bills with a tax effect of ₹67.99 crore, but only ₹64.24 crore was discharged, leaving ₹3.75 crore unreported in GSTR-3B.
• Excess availment of Input Tax Credit (ITC) amounting to ₹22.29 crore detected between 2018-19 and 2021-22 due to mismatches between GSTR-2A and GSTR-3B.
• Significant staff shortages in enforcement wings during 2018-22, with deficiencies ranging from 29% to 92% depending on the cadre (e.g., 77-86% for Guards).
• Compliance deviations in GST payments and returns filing, including non-levy of late fees, interest, and undischarged tax liabilities, involving a total tax implication of ₹439.36 crore.
• Recommendations to introduce validation controls in the E-way Bill and GST return systems to prevent duplicate invoices, suspicious vehicle usage, and enhance taxpayer compliance.

Also in the document

• CAG found that compliance deviations in GST payments and returns filing involved a tax implication of ₹439.36 crore.
• CAG reported that enforcement staff strength was significantly below sanctioned levels, with deficiencies reaching up to 92% for Head Guards and 86% for Guards during 2018-22.
• CAG noted that specific invoices for an unpaid tax liability of ₹3.75 crore could not be ascertained due to the absence of detailed reconciliation between GSTR-1 and GSTR-3B.