GST couldn’t achieve its full potential: CAG
THE CAG REPORT SAID GROWTH OF INDIRECT TAXES SLOWED TO 5.8% IN FY18, EVEN AS THE GROWTH RATE WAS 21.33% IN FY17
NEW DELHI: The roll-out of the goods and services tax (GST) could not achieve full potential of the “simplified tax compliance” regime, the Comptroller and Auditor General (CAG) of India said in its first audit report on the newly introduced indirect tax system.
The system validated input tax credit (ITC) through “invoice matching” is not in place even after two years of the GST roll-out and a “non-intrusive e-tax system” still remains elusive, the report tabled in the parliament on Tuesday said. The reform was introduced in the country on July 1, 2017.
“The complexity of return mechanism and the technical glitches resulted in roll back of invoice-matching, rendering the system prone to ITC frauds,” the Compliance Audit Report No. 11 of 2019 said.
“The system of payment and settlement of tax that was envisaged for GST was based on one hundred per cent invoicematching and availment of input tax credit, as well as settlement of IGST (integrated goods and services tax) on the basis of invoice-matching. Neither is possible as of now, as an invoicematching system has not kicked in,” it said.
The report, however, acknowledged the magnitude of the tax reform through the GST that involved efforts of stakeholders, including the businesses, in transiting to the new system. It said the issues that have been pointed out in the report should not therefore be seen by the stakeholders as a fault-finding exercise.
The report summed up the spirit of the tax reform that aims to relieve the consumer from the burden of cascading taxes, make the system as foolproof as possible, provide taxpayers an It-based system for easier compliance, induce ease of doing business and reduce interface between tax officials and assesses.
The report said the growth of indirect taxes slowed to 5.8% in FY18, even as the growth rate was 21.33% in FY17.
It expressed concerns about compliance also. “While it was expected that compliance would improve as the system would stabilise, all returns being filed showed a declining trend of filing from April 2018 to December 2018,’ it said.
Experts say that one should not judge GST on the basis of tax collections in initial two years as a shortfall was expected because of reduction in tax rates and fitment issues. They expressed confidence that the indirect tax regime will stabilise with time.
“What CAG has highlighted is something which is known. What’s is important is, what is being done to address them,” Pratik Jain, partner and leader, indirect tax, PWC India said.