CAG finds ₹3,464.94 crore in Karnataka audit findings pending settlement

Who it concerns: Government of Karnataka (Departments of Commercial Taxes, Stamps and Registration, State Excise, and Transport)

What the auditor found

• Total observations of non/short levy of tax and revenue foregone amounting to ₹ 169.18 crore.
• Short levy of Stamp Duty and Registration Fee due to misclassification of Agreements of Sale: ₹ 18.84 crore.
• Short levy of Stamp Duty and Registration Fee on Joint Development Agreements: ₹ 32.82 crore.
• Short levy of Stamp Duty and Registration Fee due to non-disclosure of facts: ₹ 14.10 crore.
• Short levy of Stamp Duty and Registration Fee on General Powers of Attorney: ₹ 15.06 crore.
• Short levy of Stamp Duty and Registration Fee due to improper execution of release deeds: ₹ 14.20 crore.
• Short levy of Stamp Duty due to improper classification of mortgage deeds: ₹ 6.69 crore.
• Short levy of Stamp Duty and Registration Fee due to undervaluation of Undivided Share: ₹ 9.00 crore.
• Short levy of Stamp Duty and Registration Fee due to undervaluation of properties: ₹ 4.05 crore.
• Loss of revenue on Additional Excise Duty due to delay in adopting revised Declared Price: ₹ 58.13 lakh.
• Potential revenue loss due to non-collection of Green Tax between 2019 and 2024: ₹ 90.46 crore.
• Potential revenue loss due to non-collection of Road Safety Cess between 2019 and 2024: ₹ 4.68 crore.
• Non/short realization of revenue due to inconsistent tax rates for contract carriages: ₹ 1.54 crore.
• Short levy of tax due to misclassification of leased Private Service Vehicles: ₹ 82.63 lakh.
• Recommendation to strengthen scrutiny of high-risk areas like valuation of non-monetary transactions.
• Recommendation to enable system-level tracking of demands from notice issue to recovery status.
• Recommendation to institutionalize cross-verification of returns with third-party data sources.
• Recommendation to investigate manual fitness tests and accelerate establishment of Automated Testing Stations (ATS).
• Recommendation to build controls in the VAHAN system to monitor Green Tax dues.
• Recommendation to mandate regular reviews of the VAHAN database to identify vehicles with expired certificates or permits.

Also in the document

• CAG found that 1,451 Inspection Reports containing 4,966 observations involving ₹ 3,464.94 crore were pending for settlement with departments as of June 2024.
• CAG reported that in 19 out of 24 sampled GST cases, Local GST Offices did not produce requisitioned records, restricting the audit scope.
• CAG noted that despite identifying additional revenue of ₹ 112.16 crore in 90 cases under Section 65, recoveries were only ₹ 9.18 crore (less than 10% recovery rate).
• CAG found that 55 Regional Transport Offices (RTOs) still used manual driving test methods, while only 12 had access to Automated Driving Testing Tracks.
• CAG reported that over 47,000 vehicles remained unregistered after temporary registration expiry between 2019 and 2024, and about 29 lakh vehicles failed to renew registration after 15 years.
• CAG observed that 3.87 lakh vehicles with expired Fitness Certificates (FCs) continued to ply on roads between April 2019 and March 2024.
• CAG found that approximately one-third (4.7 lakh out of 14.01 lakh) of vehicles requiring transport permits did not have valid permits.
• CAG noted that despite mandatory online applications since November 2021, only 3.5% of applications were processed online, and 37.9% of total fees collected were via cash.
• CAG reported that no Automated Testing Stations (ATS) had been established despite the amended Motor Vehicles Act mandating them by October 2024.