Significant inefficiencies within Gujarat’s Goods and Services Tax (GST) administration have been brought to light, as revealed in a recent report by the Comptroller and Auditor General (CAG). Presented in the Gujarat assembly, the audit findings indicate substantial revenue risks stemming from delays in refund processing, oversight gaps in return filing, and lapses in transitional credit verification. A closer look into the key findings is provided below.
Delays in GST Refund Processing
The audit scrutinized 1,262 refund claims processed between July 2017 and July 2020, and it was observed that:
i) Acknowledgement delays were found in 45% of cases, with some delays stretching up to 385 days.
ii) Refund orders experienced delays of up to 347 days in 15% of cases.
iii) Provisional refunds for zero-rated supplies were delayed by up to 44 days.
Irregular Refund Approvals
The CAG report highlighted several instances of irregular refund approvals and documentation deficiencies:
i) Incorrect refunds of Rs 91.17 lakh were attributed to irregular approvals under the inverted duty structure.
ii) Excess refunds of Rs 2.33 crore were caused by Input Tax Credit (ITC) mismatches.
iii) Refunds were frequently issued without proper documentation, including duplicate or time-barred claims.
Lack of Post-Audit Checks
A critical concern raised was the absence of post-audit checks, resulting in:
i) Double payments.
ii) Unauthorised refund sanctions.
Recommendations for Improvement
To address these issues, the CAG audit recommendations include:
i) Stricter monitoring of refund processes.
ii) Enhanced compliance mechanisms.
iii) A stronger grievance redressal system.
Compliance Deficiencies Uncovered
A subject-specific compliance audit (SSCA) of Gujarat’s GST department uncovered compliance deficiencies amounting to Rs 466.40 crore. The audit focused on the 2017-18 period and assessed data inconsistencies, tax payments, and return filing processes. Discrepancies were found in:
i) Management Information System (MIS) reports on suo motu cancellations.
ii) REG-17 notices.
iii) Incorrect turnover declarations.
iv) ITC mismatches.
v) Short tax payments.
Granular taxpayer records were unavailable in a significant number of cases, posing a potential revenue risk.
Transitional Credit Verification Lapses
The CAG also flagged deficiencies in Gujarat’s GST transitional credit verification, with non-compliance amounting to Rs 35.49 crore. Key issues included:
i) The department’s failure to provide records for a significant number of cases.
ii) Excess ITC carry-forward.
iii) Ineligible credit claims.
iv) Non-levy of interest on irregular credit usage.
In a high percentage of cases, VAT assessments were already finalised, revealing gaps in the verification process.
Conclusion:
The CAG’s findings underscore the need for significant improvements in Gujarat’s GST administration. Implementing the recommended measures is crucial to mitigate revenue risks, enhance compliance, and ensure a more efficient and transparent GST system. To prevent revenue leakage, it is imperative that tighter controls and thorough verification processes are enforced. (TOI)