CAG finds e-Procurement system lacks automated red flags for anomalies

This audit examined the e-Procurement system, the E-Way Bill (EWB) system under GST, and the oversight of GST payments/returns in Himachal Pradesh for the period ending March 2023 (covering 2018-2023 for IT audit and 2018-2022 for performance audit).

Who it concerns: Government of Himachal Pradesh, specifically the Department of Finance (e-Procurement) and the Department of State Taxes and Excise (E-Way Bill and GST oversight).

What the auditor found

• CAG found that the e-Procurement system had critical gaps, with 16 out of 100 procuring entities not using the portal since inception.
• Audit analytics flagged potential indicators of anti-competitive practices, including multiple bids from identical IP addresses and marginal bid variations suggesting rotational cartel behavior.
• CAG identified a loss of ₹4.43 crore to the government exchequer due to short-payment or non-payment of tax liabilities by taxpayers who filed GST returns regularly.
• A test-check revealed an excess availment of Input Tax Credit (ITC) amounting to ₹20.34 crore, resulting in a consequent loss of revenue.
• The EWB system permitted the generation of multiple EWBs on the same invoice and allowed EWBs for inter-state movement by composition taxpayers, which is not permitted.
• CAG noted the absence of a dedicated formation for EWB verification and a lack of patrol vehicles, which impacted operational efficiency and on-site verifications.

Also in the document

• CAG reported that the e-Procurement system lacked automated red flags for anomalies, allowing serious lapses such as potential collusion and bid rigging to go undetected.
• CAG found that the legal sanctity of Digital Signature Certificates (DSCs) was not ensured due to improper mapping with user IDs, compromising the legitimacy of bids.
• CAG observed that the Department of State Taxes and Excise had not established a dedicated formation for EWB verification, and preventive units were not using analytical reports designed by NIC for planning vehicle interception.