Two years after the government rolled out the much-touted indirect tax regime—the Goods and Services Tax, the technology-driven tax code has failed to curb evasion as was envisaged, said the Comptroller and Auditor General of India (CAG). The CAG in its report on GST for fiscal 2018-19, has called out the inefficiency of the IT backbone Goods and Services Tax Network (GSTN), saying the deficiencies in the GST system indicated a “serious lack of coordination between the executive and the developers".
Pointing out serious lacunae in the GST regime, CAG said the system-validated input tax credit through invoice matching is not in place and a non-intrusive e-tax system still remains elusive after two years of its roll out. "The efficiency of the system is the combined responsibility of all stakeholders involved in its development. The implementation and progress of GST was also being regularly monitored by DoR (Department of Revenue), which was aware of the timelines for GST roll out. Inadequacies in the system show that there was a failure in not just system design, but its testing by GSTN and acceptance by the tax departments before a pan-India roll out. As such, the executive who have endorsed the system as developed is equally accountable for the problems being faced," said the CAG report.
It pulled up the Department of Revenue, the Central Board of Indirect Taxes and Customs (CBIC), both under the finance ministry, and GST Network (GSTN) for their failure to try out the GST system adequately before rolling it out on July 1, 2017.
Terming the GST compliance system as 'non-functional', CAG pointed out that the number of GSTN 1 return filers (the form that requires invoice level details) is far less than those filing GSTN 3B (the form that calls for gross details). "This can be attributed to hassles in uploading the details for GSTN 1, and not—as the bureaucrats running the show seem to believe—to any general tendency to evade taxes. If all returns being filed showed a declining trend of filing from April 2018 to December 2018, the blame lies clearly with the GST Network that continues to flounder without being held accountable," the report stated.
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In its report on GST for 2017-18 tabled in Parliament on July 30, CAG said tax collections under the GST slowed down in the first year of its roll out. It said post-implementation, the Centre’s revenue from GST (excluding central excise on petroleum and tobacco) registered a decline of 10 per cent in 2017-18 compared to revenue of subsumed taxes in 2016-17.
The CAG also blamed the "so-called simplified format of uploading returns". "...supposed to be introduced in a couple of months, is full of rows and columns, with needless details being sought. In fact, online invoice matching, and the assumption of suspicion underlying it, should be reviewed. Rather than merely create a quarterly filing option for small businesses (below ₹5 crore turnover) and offer them a flat rate of tax under the ‘composition scheme’, GST filing rules should be streamlined for all. Small businesses still suffer overheads on account of GST compliance (which includes filling forms in English without any other language option), despite efforts to simplify processes for them."
