GST Glitches still exists: CAG Report

In its report on Goods and Services Tax ( GST ) for the period 2017-18 tabled before the Parliament on Tuesday, the Comptroller and Auditor General of India (CAG) has said that system-validated input tax credit through invoice matching is not in place and a non-intrusive e-tax system still remains elusive after two years of its roll out.

It further pointed out that the tax collections under the GST slowed down in the first year of its roll out.

According to the report, post-GST implementation, the Centre’s revenue from GST (excluding central excise on petroleum and tobacco) registered a decline of 10 per cent in 2017-18 compared to revenue of subsumed taxes in 2016-17.

It also blamed the Central Board of Indirect Taxes and Customs (CBIC), both under the finance ministry, and GST Network (GSTN) for their failure to try out the GST system adequately before rolling it out on July 1, 2017.

It said the complexity of the returns mechanism and the technical glitches resulted in roll back of invoice-matching, rendering the system prone to input tax credit frauds. Without invoice matching and auto generation of refunds, the envisaged GST tax compliance system is non-functional, it said.

While it was expected compliance would improve as the system would stabilise, all returns being filed showed a declining trend from April 2018 to December 2018, it said.

 “Since the filing of GSTR-1 is mandatory, short-filing is an area of concern and needs to be addressed,” said the CAG.

As GSTR-3B is only a summary return, short-filing of GSTR-1 implies that the tax department did not have complete invoice level details as filed by the suppliers.

This could be used to verify details given in GSTR-3B or to arrive at a turnover.

CAG said the system of payment and settlement of tax that was envisaged for GST was based on one 100 per cent invoice-matching and availment of input tax credit, as well as settlement of Integrated Goods and Service Tax (IGST) on the basis of invoice-matching. “Neither is possible as of now, as an invoice-matching system has not kicked-in,” said the CAG.

Invoice matching is a critical requirement that would yield the full benefits of this major tax reform. It would protect the tax revenues of both the Centre and states and lead to proper settlement of IGST. It would minimise, if not eliminate, the tax official-assessee interface, the report said.

In fact, even “assessment” in the sense understood in the manual system may no longer be necessary (returns themselves can be generated by a system that matches invoices). Cases of evasion, among others, can be traced by applying analytical tools and artificial intelligence to the massive data that crores of invoices generate, the CAG said.