GST Returns

CAG: GST Regime has failed to perform to its Full Potential


The Comptroller and Auditor General of India (CAG) said that it has been two years since the government’s much-touted indirect tax regime – GST was rolled out, but the technology-driven tax code has failed to curb evasion as was envisaged. The GST compliance system has not functioning up to the mark which leads to a greater number of ITC frauds.

Loopholes of GST Regime

  1. Complete GST potential was not achieved in the implementation of the simplified tax compliance regime.
  2. Lack of coordination amongst the executive and the developers.
  3. The system validations were not as per the provisions of the GST Act[1], as a result, the registration module had a few critical gaps. One such significant gap is that the system could not validate and prevent unauthorized taxpayers from availing the benefits of the Composition Levy Scheme.
  4. There is a significant dip in the compliance front. In April 2018, 87% of taxpayers filed their GSTR-3B. However, this number reduced to 79% by December.
  5. In GST, an online system which validates Input Tax Credit (ITC) claims via invoice matching is still not implemented.
  6. Lack of coordination amongst the executive and the developers.
  7. Complexity in the implementation of the GST return mechanism and technology.
  8. Lack of adherence to business growth.
  9. Short filing of GSTR-1 which is mandatory to file is an area of concern which needs to be addressed.
  10. Due to lack of preparedness of industry and GSPs, Initially GSTR-3B was introduced for just two months which has been continued till date and GSTRs-2 and 3 have been kept in abeyance.

Data Analysis of Growth Rate and Frauds

  • As during the year 2016-17, the percentage of growth rate was 21.33 percent which in the year 2017-18 slowed down to 5.80 percent. Additionally, there was a 10 percent dip with the revenue from goods and services.
  • During 2017-18, there was a short transfer of Rs 6,466 crore of GST compensation cess to the public account.
  • In the last two years of its implementation Rs, 45,682.83 crores worth of tax frauds were found.
  • In the April to June period of the fiscal year 2019-20, the government data showed that an amount worth Rs 6520.40 crore was detected and a total, 9,385 cases of GST frauds were reported in the last two years.

See, Read: What is the E-Way Bill System under GST?.

Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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