Loopholes In Implementing GST: Where Did The Government Fall Short?

In a first-ever audit of the Goods and Services Tax (GST) regime, the Comptroller and Auditor General of India (CAG) has found some significant shortcomings in its implementation and certain areas where the full potential of GST roll out has not been achieved. 

In its report, which was tabled in Parliament on Tuesday, the official auditor said that while the GST eliminated multiplicity of tax rates to a large extent, one significant area where its full potential was not realised was the roll out of the simplified tax compliance regime.

“Even after two years of roll out of GST, system validated Input Tax Credit through ‘invoice matching’ is not in place and nonintrusive e-tax system still remains elusive,” the CAG report stated.

GST was rolled out with effect from July, 2017 with the objectives of reducing tax cascading, ushering in a common market for goods and services and bringing in a simplified, self-regulating and non-intrusive tax compliance regime.

“The complexity of return mechanism and the technical glitches resulted in roll back of invoice-matching, rendering the system prone to ITC frauds. Thus, on the whole, the envisaged GST tax compliance system is non-functional. The deficiencies in the GST system also point to a serious lack of coordination between the Executive and the developers,” stated the CAG report.

The auditor also pointed towards a slowdown in growth of indirect taxes with implementation of GST. It said the growth slowed down to 5.8% in 2017-18 whereas the growth rate was 21.33% during 2016-17.

“Post implementation of GST, the Centre’s revenue on goods and services (excluding central excise on petroleum and tobacco) registered a decline of 10% in 2017-18 as compared to revenue of subsumed taxes in 2016-17,” the report said.