GST technical glitches behind ITC frauds: CAG report

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The Comptroller and Auditor General (CAG) of India has found that the goods and services tax (GST) system is inclined to input tax credit (ITC) frauds due to complexness in the compliance system. In this article we will discuss on GST technical glitches behind ITC frauds.

GST technical glitches behind ITC frauds

The Comptroller and Auditor General (CAG) of India has announced that the goods and services tax (GST) system is inclined to input tax credit (ITC) frauds due to complexity in the obedience system.

The initially envisaged system-validated ITC through ‘invoice matching’ had not been implemented. The complexness of return mechanism and technical glitches had occurred in roll-back of key GST returns, providing the system prone to ITC frauds.

CAG recommended rebuilding a definite time frame for rollout simplified returns forms as frequent different are occurring in a delay in its stabilisation and continued apprehension in the GST ecosystem.

During October 2018 to March 2020, CAG assessed records relating to 4,736 23,106 refunds in 33 Central GST (CGST) commissionerates. It noticed non-adherence to actual requirements in processing refunds in 280 claims (6 per cent) implicating an amount of Rs 16.16 crore.

Further Notification on GST Shortfall

The CGST revenue was short of the Budget Estimates and the modified Estimates during 2018-19 and 2019-20. The shortfall Budget Estimates was 22 per cent and 10 per cent for the years, respectively. Also, CGST revenue accumulated 2.97 per cent in FY20 over FY19. CGST revenue as a percentage of GDP, though, decreased from 3.08 per cent in FY19 to 2.95 per in FY20.

The central Government recommendations of the GST Council, rate rationalisations have been enforced from time to time by the government and, therefore, the real indirect tax collections may vary with respect to the target set for a financial year.

Also, it should be reported that in December 2015, the report on the revenue neutral rate and pattern of rates for GST recommended the range of 15-15.5 per cent as the revenue neutral rate. Regardless, the important weighted average GST rate as of July 2019 was 11.6 per cent.

 In addition, the GST Council modified the threshold turnover margins upwards for registration of taxpayers and the composition levy scheme, which affected GST collections, the ministry asserted.

GST collections top Rs 1 lakh Cr for 5 straight months since Oct 2020: MoS Finance

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