Indirect Tax

Report No. 1 of 2021 - Compliance Audit on Union Government Department of Revenue (Indirect Taxes – Goods and Services Tax, Central Excise and Service Tax) Customs

Date on which Report Tabled:
Wed 24 Mar, 2021
Date of sending the report to Government
Thu 18 Feb, 2021
Government Type
Union Department
Indirect Tax
Sector Taxes and Duties


Compliance Audit Report of the Comptroller and Auditor General of India on Goods and Services Tax, Central Excise and Service Tax revenue (Report No. 1 of 2021) for the years ended March 2019 and March 2020 was presented in Parliament on 24 March 2021.

This Report contains significant results of the compliance audit of Central Board of Indirect Taxes and Customs (CBIC) under the Department of Revenue, and Information Technology audit of Goods and Services Tax Network (GSTN). The report contains audit findings relating to Goods and Services Tax and legacy Indirect Taxes viz. Central Excise and Service Tax. 

We noticed that owing to the continuing extensions in the roll out of simplified return forms, and delay in decision making, the originally envisaged system-verified flow of ITC through “invoice matching” is yet to be implemented and a non-intrusive e-tax system still remains unimplemented. The GST return system is still a work in progress despite more than three years of GST roll out. In the absence of a stable and simplified return mechanism, one of the main objectives of roll out of GST i.e. simplified tax compliance system is yet to be achieved.

CBIC has yet to put in place an effective system of scrutiny of returns based on detailed instructions/manual for the tax officers. As a result, an important compliance function of the department, as mandated by law, is yet to be effectively rolled out even after three years of GST implementation.

We undertook IT audit of GSTN (Phase-II) to assess whether the Refund and Returns modules implemented by GSTN were in line with the provisions of the Acts and Rules governing the GST regime and the System Requirements Specifications (SRS). In addition, E-Way Bills module, which has been developed by National Informatics Centre, under the supervision of GSTN was also reviewed.

In 14 cases, the key validations / functionalities as existing in the rolled out modules were not found aligned to the applicable provisions even though SRS was correctly framed.

We verified 5,822 out of 77,363 transitional credit cases in 81 Central GST Commissionerates and five Audit Commissionerates, and noticed 1,182 instances (20 per cent) of non-compliance. We examined the records relating to 4,736 refunds out of 23,106 in 33 CGST Commissionerates and  noticed non-adherence to extant provisions in processing of refunds in 280 claims (6 per cent) involving an amount of Rs.16.16 crore.

We had examined the SCN and adjudication process of the department and noticed significant deviations from law/rules such as incorrect computation of demand in SCNs, late issuance of SCNs, delay in adjudications etc. during audit of SCNs that were pending for adjudication as on 31 March 2019.

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