Flawed GST is the Reason of ITC Frauds : CAG

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The Comptroller and Auditor General (CAG) of India has reported that due to complexity in the compliance system the Goods and Services Tax (GST) system is inclined to Input Tax Credit (ITC) frauds.

In a report submitted by CAG in Parliament, it said “We noticed 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.”

Despite more than three years of GST rollout, the GST return system is still a work in progress. In the absence of a stable and simplified return mechanism, simplified tax compliance system, one of the main objectives of roll out of GST, 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, the report added.

Further, “we observed instances of irregular grant of refund due to non-consideration of minimum balance in electronic credit ledger, irregular sanction of refund of ITC availed of on capital goods, etc.,” the report said.

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