₹2,732.56 crore GST tax liability and ITC mismatch due to missing taxpayer records in 431 cases

This audit examined the compliance and IT systems related to the levy and collection of Central Goods and Services Tax (GST) by the Department of Revenue (CBIC) for the period ended March 2024, with specific focus on the GSTN IT system and Works Contract/Construction Services sectors.

Who it concerns: Union Government, Department of Revenue (Indirect Taxes – Goods and Services Tax), Central Board of Indirect Taxes and Customs (CBIC), and the Goods and Services Tax Network (GSTN).

What the auditor found

• CAG identified 1,334 compliance deficiencies involving ₹401.42 crore in the Works Contract and Construction Services sector.
• The Department accepted audit observations for 903 cases with a money value of ₹268.36 crore and reported recovery of ₹15.88 crore in 399 cases.
• In 431 cases involving 392 taxpayers, granular records were not available with the Department, involving identified mismatches in tax liability and Input Tax Credit (ITC) of ₹2,732.56 crore.
• CAG found deficiencies in the GSTN Registration module, including improper validations and process delays in approval.
• CAG observed nine deficiencies in the GSTN Returns module regarding business rule mapping and eligibility verification.
• CAG noted five deficiencies in IGST settlement reports, including discrepancies in apportionment.
• CAG recommended GSTN expedite rectification of validation deficiencies, improve monitoring of Composition Levy Scheme taxpayers, and address inconsistencies in auto-populated return values.

Also in the document

• CAG reported that in 431 cases, the Department did not have granular taxpayer records, leading to identified mismatches in tax liability and ITC of ₹2,732.56 crore.
• CAG found that out of 56 outstanding audit findings from previous phases, rectification was not initiated, was inadequate, or was not required in the remaining cases after 38 were rectified and one was partly rectified.