CAG asks CBIC to complete verification of GST transitional credit claims

New Delhi: The Comptroller and Auditor General (CAG) on Monday recommended that the indirect tax department should complete the verification of transitional credit allowed under the GST mechanism.

As part of the transition to GST with effect from July 1, 2017, taxpayers were allowed to file Form TRAN-1 and avail tax credit on the basis of the closing balance of the credit declared in the last return under the pre-Goods and Services Tax (GST) regime

In the Compliance Audit Report on GST for the year ended March 2021, tabled in Parliament on Monday, the CAG said the audit review disclosed significant irregularities in the transitional credit claims of taxpayers.

It said that though the Central Board of Indirect Taxes and Customs (CBIC) in 2018-19 had identified the top 50,000 cases which claimed maximum transitional credit for verification, the exercise was not yet completed, and the department was yet to verify 8,849 cases.

"The rate of recovery of detected irregularities was low. Cross jurisdictional issues and lack of coordination in central tax jurisdictions in some zones impeded verification and initiation of recovery actions," the CAG said.

Irregularities noticed were relatively higher in four categories viz; ineligible credit of duty paid goods in stock without documents, irregular claim on unavailed credit on capital goods, ineligible credit on inputs or input services in transit, and irregular claim on closing balances.

The audit recommends "ensuring verification of the high-risk claims reflected in Table 7aB of Tran 1 (credit on duty paid stock without invoices) and the cases where the transitional credit claim under Table 5a (closing credit balance of legacy returns) was in excess of the closing balance of legacy return".

The CAG audit also found significant data inconsistencies between the taxable value and declared tax liability.

Inconsistencies were also noticed between the CGST and SGST components of GST, and between ITC figures captured in GSTR-3B and GSTR-9 returns.

"Due to significant inconsistencies in the GST data, audit could not establish the reliability of data, for the purpose of finding audit insights and trends in GST revenue, and assessing high risk areas such as tax liability and ITC mismatch at the pan-India level," the CAG said.

(With PTI inputs)

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