First Audit Report of CAG (Indirect Taxes-GST) for the year ended March 2019
GST
Dated:- 1-8-2019
=============
\nDocument 1
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\nReport of the
\nComptroller and Auditor General of India
\nfor the year ended March 2018
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\nINDIAN
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\nNAUDIT AND ACCOUNTS
\nDEPARTMENT
\n\u00e0\u00a4\u00b2\u00e0\u00a5\u2039\u00e0\u00a4\u2022\u00e0\u00a4\u00b9\u00e0\u00a4\u00bf\u00e0\u00a4\u00a4\u00e0\u00a4\u00be\u00e0\u00a4\u00b0\u00e0\u00a5\u008d\u00e0\u00a4\u00a5 \u00e0\u00a4\u00b8\u00e0\u00a4\u00a4\u00e0\u00a5\u008d\u00e0\u00a4\u00af\u00e0\u00a4\u00a8\u00e0\u00a4\u00bf\u00e0\u00a4\u00b7\u00e0\u00a5\u008d\u00e0\u00a4\u00a0\u00e0\u00a4\u00be
\nDedicated to Truth in Public Interest
\nUnion Government
\nDepartment of Revenue
\n(Indirect Taxes – Goods and Services Tax)
\nReport No. 11 of 2019
\nReport of the
\nComptroller and Auditor General
\nof India
\nfor the year ended March 2018
\nUnion Government
\nDepartment of Revenue
\n(Indirect Taxes – Goods and Services Tax)<\/p>\n
= = = = = = = =<\/p>\n
Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n iendliness of the registration module = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ect Taxes – Goods and Services Tax) = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n asion etc., can be traced by applying = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n as per Finance Commission formula, = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n seven cases, the validations were not built-in even = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n of CPIN leading to non-reconciliation of GST receipts. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n nd only Disaster Recovery Plan = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ciencies that need to be addressed by the = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n features of the Goods and Services Tax = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n oms = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 2016, = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n s per Article 279A (4), the Council will make recommendations to the Union = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n – Goods and Services Tax) = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n location and type of the taxpayers, = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n Section 171 of CGST Act, 2017 stipulated that any reduction in rate of GST on = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n nic way) bill has envisaged one electronic way = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ese Commissionerates, there are = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n of = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n y bills replaced = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 00 = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n \nwould file invoice-wise details of outward supplies made by them during the = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n supplies of Z (GSTR-1) = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n mendment = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ve been kept in abeyance. As a = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n rified ITC = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ise summary of outward and inward = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ms = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ed before further changes in this mechanism are = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n purpose as this whole = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ing \u00c2\u00b9\u00c2\u00b2 (UAT) environment over a period = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ansferred online to the tax officer, as = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n of return, registration, payment and e-way bill data to identify = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n within the broad timelines for = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n \ninvolved in its development. The implementation and progress of GST was = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n \nnot fully achieved = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n and = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n Table No. 2: Resources of the Government of India = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n from table 3 above, the CGST revenue was short of the = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 1 = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n adjusted in ten equal = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ement and refund is being apportioned provisionally. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n as payable in = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ance Accounts 2017-18, it was = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n d from pre-GST regime, accounting for around 50 per cent, = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n n (9.2 per = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n pril to December 2018. Thus, while it was expected that = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n As could be seen from table No.7 = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 0% = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n period from April 2018 to = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n iling rates for Telangana (68 per = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n tegory have been = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n d be used to verify details given in = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n Board of Directors of the = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n \nthe draft documents were made available well before roll out of GST. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n audit of receipts under Section 16 = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n overed in this = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ed in January 2019 have been = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ases (Appendix-V), the key validations\/functionalities as = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n he Rules. Detailed audit findings have been = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n further replied (June 2019 through DoR) that as the migration process = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ese changes were expected to be = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ssible changes over a period of time. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ed 27 June 2017 notified that = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ing process to = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n was expected to be available by 30 September 2019. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 9) through DoR. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ng the behaviour of applicants, = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n eria incorporated in the search = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n mplemented by June 2019. GSTN further stated (June 2019) = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n rect mapping of taxpayers were noticed by us during field audit = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ing with the audit = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ST provisions were = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n schematically represented as below:- = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n the cash ledger of the taxpayer could be updated on a real time basis. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n on-updation of their ECL, in spite of money being already = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n decision on the matter even though this issue had = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ad been continuing on = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n sign stage itself. Being directly related to tax payments, = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n \nThe Control Total files shared with the Accounting Authorities did not create = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n of pinging, then = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n acility of payment through Debit \/ Credit = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n tilised till specified period. = = = = = = = =<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nFindings accepted and corrective action taken or initiated
\n54
\n55
\n3.11
\nConclusion on Registration Module
\n56
\n3.12
\nIntroduction
\n57
\n3.13
\nShortcomings in updating ECL
\n58
\n3.14
\n3.15
\nNon-implementation of service requirements of banks
\nNon-reconciliation with accounting authorities
\n60
\n61
\n3.16
\n62
\n3.17
\n3.18
\n3.19
\nNon-acceptance of payment where payment details were
\nreceived after expiry of Challan
\nSystem level controls found absent in reconciliation files
\nPayment through debit\/credit cards not provided in the GST
\nIT system
\nDisplay of messages was not in sync with the actual status of
\nthe transaction
\nConclusion on Payment Module
\n3.20
\n3.21
\nThe Provisions for IGST Settlement
\n63
\n83
\n62
\n63
\n663
\n64
\n64
\nContents
\nPage
\n3.23
\nDuplicate records
\n3.24
\n3.22 Incomplete IGST Settlement
\nIncorrect computation of IGST Settlement
\n66
\n69
\n70
\n3.25 Erroneous entries in settlement reports
\n71
\n3.26
\nUnrealistic claims of ITC of IGST
\n74\n<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nPreface
\nThis Report has been prepared for submission to the President of India under
\nArticle 151 of the Constitution of India.
\nThe magnitude of the tax reform that GST has been, cannot be over-stated.
\nElsewhere in the Report it has been noted that the efforts of all the
\nstakeholders, including the businesses, in transiting to this system are
\nappreciable. That there would be teething problems in such a major
\ntransition is also not unexpected. The issues that remain, and that have been
\npointed out in the report, should not therefore be seen by the stakeholders as
\na fault-finding exercise. The gaps \/ shortcomings have been pointed out in the
\nspirit of constructive suggestions to realise the full potential of this major
\nreform. Issues raised in the report are consistent with the spirit of the reform
\nitself to relieve the consumer from the burden of cascading taxes; to make
\nthe system as fool-proof as possible; to provide the taxpayers an IT<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nanalytical tools and Al to the massive data that crores of invoices generate.
\ni
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nExecutive Summary
\nChapter I: Implementation of Goods and Services Tax (GST)
\nGST was rolled out with effect from 1 July 2017 with the objectives of
\nreducing tax cascading, ushering in a common market for goods and
\nservices and bringing in a simplified, self-regulating and non-intrusive
\ntax compliance regime.
\n(Paragraph 1.6)
\nThe roll out of GST has been a landmark achievement of the
\nGovernment with respect to unifying multiple central and state taxes
\nbarring a few goods \/ sectors and availability of Input Tax Credit (ITC)
\nacross the entire value chain. Multiplicity of tax rates has also been
\neliminated to a large extent. The objective of roll out of single IT based
\ninterface for taxpayer has also been achieved to some extent.
\n(Paragraph 1.6.2)
\nOne significant area where the full potential of<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nwhich is in contravention of the provisions of the Constitution of India
\nand the IGST Act. This also has the impact of distribution of funds to the
\n!!!
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\n\u2022
\nStates on a completely different basis instead of 'Place of Supply'
\nconcept as envisaged in the IGST Act.
\n(Paragraph 2.1.3)
\nPost implementation of GST, the Centre's revenue on goods and services
\n(excluding central excise on Petroleum and Tobacco) registered a decline
\nof 10 per cent in 2017-18 as compared to revenue of subsumed taxes in
\n2016-17.
\n(Paragraph 2.1.4)
\nThere was a short transfer of 6,466 crore of GST Compensation cess to
\nthe Public Account during 2017-18.
\n(Paragraph 2.1.5)
\nReturns filing
\n\u2022 While it was expected that compliance would improve as the system
\nwould stabilise, all returns being filed showed a declining trend of filing
\nfrom April 2018 to December 2018.
\n\u2022
\nThe filing percentage o<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nthough SRS was correctly framed in eight cases and the SRS provision included
\na condition not prescribed in the Act in one case.
\n(Paragraph 3.5)
\niv
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nRegistration Module
\nSystem validations were not aligned to the provisions of the GST Acts and
\nRules, leaving the following crucial gaps in GST Registration module:-
\n\u2022 System failed to validate and debar ineligible taxpayers from availing
\nComposition Levy Scheme.
\n(Paragraph 3.7.2)
\n\u2022
\nMandatory fields were found made optional or accepting junk values.
\n\u2022
\n(Paragraph 3.8.1)
\nTDS registrations were allowed under invalid category.
\n(Paragraph 3.8.3)
\nLack of validation of key fields in Registration (Legal Name, Type of
\nBusiness and CIN) with CBDT and MCA Databases.
\n(Paragraph 3.10.2)
\nPayment Module
\nThe payment module, despite being in operation since 1 July 2017, was
\nfraught with operational defi<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n(Paragraph 3.15)
\nIGST Settlement reports
\nAll the IGST Settlement Ledgers were not being generated due to
\nnon-implementation of corresponding GST modules, like imports and appeals.
\nThis, coupled with the inaccuracies in the settlement algorithm and limitation
\nof the GSTR-3B return in capturing all the information required for settlement,
\nhad a bearing on the settlement of funds to the Centre and various States.
\n–
\nThe incomplete IGST ledgers were partly responsible for
\n2,11,688 crore of IGST balance remaining unsettled during 2017-18.
\n(Paragraph 3.22)
\nDuplicate records were noticed in 6,748 cases in 5 Settlement ledgers,
\nleading to inaccurate settlement of 416.07 crore IGST funds for the
\nperiod from July 2017 to July 2018.
\n(Paragraph 3.23)
\nIncorrect settlement of IGST amounting to 359.46 crore during the
\nperiod from July 2017 to July 2018 was noticed because of erroneous
\nentries in settlement ledgers due to the alg<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nhad been in place.
\n(Paragraph 3.28.1)
\nLack of a systemic approach to change management, coupled with some of
\nthe deficiencies pointed by this audit remaining unaddressed even after GSTN
\nreported corrective action, indicated the crucial risks existing in the
\napplication running on the GST portal.
\n(Paragraph 3.29)
\nTo sum up the IT Audit findings:
\nWhile acknowledging that GST is a completely new system being developed,
\nin view of its magnitude and Pan-India impact, it is all the more necessary that
\ndue care is taken both in development and in testing of the system before roll
\nout. The failure to map business rules correctly and the absence of key
\nvalidations in the rolled out system points to inadequacies in the functioning
\nof GSTN.
\nThe issues brought out in IT audit also pointed towards the need for GSTN to
\nre-examine prioritisation of development of various functionalities,
\nstrengthen their root cause analysis and testing process to ensure<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\ndepartment.
\n(Paragraph 4.1)
\nSome of the audit findings on Transition Credits indicated that data \/
\nred flags available in ACES have not been efficiently leveraged to
\nidentify and reject inadmissible credits.
\n\u2022
\n(Paragraph 4.7)
\nNon-allocation or wrong mapping of registered taxpayers carried the
\nrisk of the returns filed\/ not filed by such taxpayers not being subject
\nto any kind of scrutiny by the jurisdictional officer. In this highly IT
\nintensive environment also, Range Offices had to physically take up
\nproblems created by an IT system for resolution.
\n(Paragraph 4.9.2)
\n\u2022 The instances of non-adherence to the provisions relating to Refunds,
\npointed towards the need for expediting automation of refund
\nprocessing with proper checks and validations besides improving the
\nsystem for monitoring manual processing of refunds, till automation is
\ncompleted.
\n(Paragraph 4.11)
\nThe system of payment and settlement of tax that wa<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n(GST) including GST returns mechanism and the status of implementation of
\nGST.
\n1.1
\nBackground of GST
\nA comprehensive GST based on the Value Added Tax (VAT) principle was first
\nsuggested by the Kelkar Task Force in December 2002. The introduction of
\nGST in India was first announced in the Union Budget 2006-07. Since then the
\nEmpowered Committee of Ministers had worked on preparing the back
\nground material for GST and the draft GST Acts. Implementation of GST
\nfinally materialised with the Parliament passing the Constitutional
\nAmendment Act in September 2016, followed by the State Legislatures and
\nGST was rolled out with effect from 1 July 2017 (including Jammu and
\nKashmir with effect from 8 July 2017).
\nAs stated by the President of India Sri Pranab Mukherjee on the launch of
\nGST from the Central Hall of Parliament on 30 June 2017, “GST is the result
\nof a broad consensus arrived at between the Centre and the States and is a
\ntribute <\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nDuty
\ncommonly
\nknown
\nas
\nCountervailing Duty
\nSpecial Additional Duty of
\nCustoms.
\nState Value Added Tax
\n(VAT)\/Sales Tax (except five
\npetroleum products and
\nalcoholic liquor for human
\nconsumption)
\nEntertainment Tax (other than
\nthe tax levied by the local
\nbodies)
\nCentral Sales Tax (levied by the
\nCentre and collected by the
\nStates)
\nOctroi and Entry tax
\nPurchase tax
\n\u2022 Luxury tax
\nTaxes on lottery, betting and
\ngambling
\nCentral\/State Excise duty and VAT would be continued on five Petroleum
\nproducts, which would be subject to the levy of GST whenever notified on the
\nrecommendation of the GST Council. Tobacco products could be subjected to
\nboth Central Excise duty and GST. Alcoholic liquor for human consumption
\nhad been kept outside the ambit of GST.
\n1.2.3 Components of GST
\nThere are three components of GST as follows: –
\n\u2022
\n\u2022
\n\u2022
\nCentral Goods and Services Tax (CGST) : payable to the Central
\nGovernment on supply of goods and services with<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nfor introduction of Goods and Services Tax in the country was passed by
\nRajya Sabha on 3 August 2016 and by Lok Sabha on 8 August 2016.
\nConsequent upon this, the President of India accorded assent on 8
\nSeptember 2016, and the same was notified as the Constitution (One
\nHundred and First Amendment) Act, 2016.
\nThe following Acts were passed for implementation of GST with effect from
\n1 July 2017: –
\n\u2022
\nThe CGST Act, 2017;
\n\u2022 The UTGST Act, 2017,
\n\u2022
\nThe IGST Act, 2017;
\n\u2022
\nThe GST (Compensation to States) Act, 2017
\nThe above Acts were assented by the President of India on 12 April 2017 and
\nenacted with effect from\u00c2\u00b2 1 July 2017. In addition to the above, each of the
\nStates have also passed the SGST Act.
\nAll the above Acts were further amended vide the CGST Amendment Act,
\n2018 and the GST (Compensation to States) Amendment Act, 2018, the IGST
\n(Amendment) Act, 2018 and the UTGST (Amendment) Act, 2018 notified on
\n29 August 2018 and made effective<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nand the States on: –
\na) the taxes, cesses and surcharges levied by the Union, the States and
\nthe local bodies which may be subsumed in the GST;
\nb) the goods and services that may be subjected to, or exempted from
\nGST;
\nc) the model GST Laws, principles of levy, apportionment of GST levied
\non inter-State trade supplies and the principles that govern the place
\nof supply (POS);
\nd) the threshold limit of turnover below which goods and services may
\nbe exempted from GST;
\ne) the rates including floor rates with bands of GST;
\nf) any special rate or rates for a specified period, to raise additional
\nresources during any natural calamity or disaster;
\ng) special provision with respect to the States of Arunachal Pradesh,
\nAssam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram,
\nNagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
\nh) any other matter relating to the GST, as the Council may decide.
\nWh<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nconvert GSTN into a fully owned Government Company. Further action on
\nthis decision was yet to be taken by the Government.
\nThe objectives and organizational structure have been further detailed in
\nChapter III of this report.
\n1.4.3 Cross empowerment and distribution of taxpayers
\nUnder GST, the taxpayers have to obtain separate registration in each State
\nwhere they operate. A single challan is generated for paying all taxes of GST
\n(viz. CGST, IGST, SGST and UTGST) under each registration and one single
\nreturn is filed for both the central and state taxes.
\nIn view of this dual control, the GST Acts provide for cross empowerment of
\nthe Central and State tax officers to administer all the components of GST viz.
\nCGST, SGST, UTGST and IGST. The tax officers carry out administration of all
\ncomponents of GST in respect of the taxpayers or specific areas allocated to
\nthem. While the State Commercial tax departments are responsible for
\nadministering functi<\/p>\n
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\nas may be mutually agreed.
\nThe State tax officers have been empowered * (October 2017) to grant refund
\nof IGST and CGST and similar instructions on the State side were also issued
\nempowering the Central tax officers to grant refund of SGST. The GST Council
\nin its 9th meeting (16 January 2017) recommended that both the Central and
\n3 Except for the State of Jammu and Kashmir where all the taxpayers below 1.5 crore
\nwere allocated to the State.
\n4
\nVide notifications No. 11\/2017-Integrated Tax and No.39\/2017-Central Tax, both dated 13
\nOctober 2017.
\n5
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nState tax administrations shall have the power to take intelligence-based
\nenforcement action in respect of the entire value chain and CBIC gave effect to
\nthis decision through a DO letter 5 issued (October 2018) to its field formations.
\n1.4.4 Compensation to the States for loss due to implementation of GST
\nThe Constitution Amendme<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nany supply of goods or services as compared to pre-GST tax rates, or the
\nbenefit of ITC, should have been passed on to the recipient by way of
\ncommensurate reduction in the prices. The wilful action of not changing the
\nfinal price of the good or service by various means, despite the reduction in
\nthe rate of the tax for that particular goods or services, would amount to
\n“profiteering”. The CGST Act, 2017 provided for a 3-tier structure for
\ninvestigation and adjudication of the complaints regarding profiteering.
\n\u2022 National Anti-profiteering Authority
\n\u2022
\nDirectorate General of Anti-profiteering
\nState-level screening committees and standing committee
\nAny consumer or organisation experiencing the non-reduction in the price of
\nthe goods or services despite reduction in the rate of GST could file the
\ncomplaint with proper evidences.
\nAny supplier, trader, wholesaler or retailer, who could no<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nbill, to be carried by the person in charge of conveyance, providing for a
\nhassle free movement of goods throughout the country. The e-way bill
\nsystem, a web based solution designed and developed by National
\nInformatics Centre (NIC), has been introduced nation-wide for all inter-State
\nsupplies with effect from 1 April 2018 and has been made compulsory for
\nmovement of goods of consignment value exceeding 50,000. As regards
\nintra-State supplies, option was given to the States to choose any date on or
\nbefore 3 June 2018. All the States have notified e-way bill rules for intra-
\nState supplies, the last being NCT of Delhi where it was introduced with effect
\nfrom 16 June 2018. Different threshold limits have been fixed by different
\nStates for generation of e-way bills for intra-state supplies.
\n1.5
\nCentral Administrative Structure
\nThe Department of Revenue (DOR) of Ministry of Finance (MOF) functions
\nunder the overall direction and<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n49 GST Appeal Commissionerates, 48 GST Audit Commissionerates and
\n22 Directorates dealing with specific functions such as DG (Systems) for
\nmanagement of Information Technology projects and DG, NACEN for training
\nneeds.
\n6 formerly Central Board of Excise and Customs (CBEC).
\n7
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\n1.6
\nThe objectives of GST
\nIt was envisaged that GST would subsume a number of indirect taxes
\npresently being levied by Central and State Governments into a single tax,
\nthereby reducing the cascading of taxes and providing a common national
\nmarket for Goods and Services. GST was also expected to simplify the tax
\nregime and result in better tax compliance and a non-intrusive E tax system
\ndue to a robust IT Infrastructure. Due to the seamless transfer of input tax
\ncredit from one stage to another in the chain of value addition, GST was to
\nhave an in-built mechanism in its design that would incentivise tax\n<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nCGST, 22,722 crore of SGST, 47,469 crore of IGST and GST Compensation
\nCess of 7,198 crore.
\n51.4 per cent of the taxpayers filed GSTR-3B return for July 2017 by due date
\n(28 August 2017). The monthly returns GSTR-1 and 2 were released on the
\nportal by 1 September 2017.
\nBut changes were made to the formats of the reports. Due dates for various
\nkey activities were postponed and GSTR-2 and 3 kept in abeyance. These
\nchanges were due to various factors like complexity of the formats or
\ntechnical glitches on GST portal or the claimed lack of preparedness of stake
\nholders and further changes triggered by these changes. As a result, GST
\nSystem has remained a system still in the making even after nearly two years
\nof roll out with the entire return mechanism undergoing major changes.
\nThe chart No.1 maps the objectives of the GST with the mechanisms
\nenvisaged and their current status of implementation
\n8
\nOBJECTIVES
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nmanual check posts
\nACHIEVEMENT
\nMostly
\nachieved
\nMostly
\nachieved
\nNot achieved
\nNot Achieved
\nPartly
\nAchieved
\nPartly
\nAchieved
\nIMPACT
\nNew simplified
\nreturns yet to be
\nrolled out
\n6
\nUnverified ITC
\nComplication in
\nfinalisation of
\nannual returns
\nManual processes
\nstill continuing
\nAvodable physical
\ninterface with tax
\nofficials
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nThe following is the status of implementation of mechanisms envisaged
\nunder GST, as depicted in Chart No.1.
\n(a)
\nMultiple taxes
\nThe objective of subsuming multiple taxes has been mostly achieved with
\nGST subsuming 37 different central and state taxes with ITC eligible across
\nthe value chain. Only a few goods \/ sectors have been kept outside GST, with
\na provision in constitutional amendment to subsume the major product viz.
\npetroleum products as and when decided by the GST Council.
\n(b) Tax structure
\nGST ushered in a tax structure in which the same good or serv<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n12 per cent
\n2500 7500
\n18 per cent
\n7500 and above
\n28 per cent
\nFrom the above table, it could be seen that goods or services of same nature
\nhave been subjected to multiple tax rates.
\n10
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nThe GST Council, through its various meetings, reviewed the slab and rate
\nstructure from time to time. Since the inception of GST, CBIC issued 47, 30
\nand 9 notifications relating to changing of CGST rates in 2017, 2018 and 2019
\n(up to 31 March 2019) respectively. Similarly, 50, 31 and 8 notifications were
\nissued changing IGST rates in 2017, 2018 and 2019 (up to 31 March 2019)
\nrespectively.
\nThus, though the tax rate structure has been simplified as compared to pre-
\nGST tax era, there is scope for further simplification.
\n(c)
\nReturns prescribed
\nIn GST, the taxpayers have to file a single return for all GST taxes viz CGST,
\nSGST, IGST and GST Compensation Cess. The basic features of the return
\nmechanism in GST envisaged el<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nmonth through GSTR-1. The details of outward supplies so furnished by the
\nsupplier in GSTR-1 were be made available electronically to the registered
\nrecipients through form GSTR-2A. Similarly, details of supplies relating to
\ncomposition taxpayers, Input Service Distributors and Non-Resident
\ntaxpayers as well as Tax Deducted at Source (TDS) by Government
\ndepartments \/ agencies and E-commerce operators also were to be made
\navailable electronically to the recipients. Thereafter, based on details
\navailable in form GSTR-2A, the taxpayer was supposed to furnish form GSTR-2
\nafter including details of other inward supplies.
\nThe details of inward supplies added, corrected or deleted by the recipient in
\nhis form GSTR-2 were to be made available to the supplier electronically in
\nform GSTR-1A through the common portal. The supplier may either accept
\n11
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Servic<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nVerified by his recipients
\nPayment of taxes
\nPayment
\nCash Ledger
\nby Z
\nITC Ledger
\nTax Liability
\nRegister Ledger
\n7
\nWith
\nCorrections
\nGSTR-1A
\nGSTR-2 of Z
\n4
\n3
\nYes
\n5
\nAuto-populate
\nCorrection
\naccepted
\nby Y
\nNo
\nGSTR-3 of Z
\nDifference added
\nto Tax liability of Z
\n8
\nMonthly returns
\nconsolidation in
\nAnnual return
\nNB: Similarly details from GSTRS-4, 5, 6, 7 and 8 representing supplies from
\ncomposition taxpayers, Non-Resident taxpayers, Input Service Distributors,
\nTax Deducted at Source (TDS) by Government departments \/ agencies and
\nTDS by E-commerce operators respectively were also to auto-populate GSTR-
\n2A of recipient. Only GSTR-1 has been shown in the above flow chart for
\nillustrative purposes.
\nWhile this was the system originally envisaged and designed, the due dates of
\nthese key returns were postponed, a fortnight before launch of GST quoting
\nlack of familiarity of the trade and apprehensions expressed with regard to
\nthe system readi<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nwas passed, the Empowered Committee of Ministers (ECM) had started
\nworking on the model GST Acts and business processes and the first model
\nGST Act was placed in public domain in June 2016. The Business Process
\nDocuments on Registration, Payment, Registration and Refund were also
\nplaced in public domain during April 2015 to October 2015. The GST model
\nlaws were prepared by Nov 2016 and Acts passed by Parliament in April 2017.
\nThe Draft Rules on Returns, Registration, Payments, Refunds, Invoice initially
\nprepared in Sep 2016 and the next version of draft rules duly adding ITC,
\nTransition, Valuation and, Composition were finalised in March 2017 and
\napproved by Council in May 2017. The draft forms (Invoice, Payments,
\nRegistration, Refund, Return and Mismatch) were finalised in Sep 2016 and
\nfurther set of draft forms covering Composition, ITC, Payment, Refund and
\nRegistration were finalised in May 2017. Final rules and forms were notified
\non 19 June 2017.
\nGST is a m<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nresult the key mechanism of system verified ITC and invoice matching was
\nnot achieved. As on date ITC as reported by the taxpayer in the summary
\nreturn is used for further transactions.
\nIn July 2018, i.e. one year after introduction of GSTR-3B putting GSTRs-2 and
\n3 on hold, the GST Council announced that a new simplified return
\n13
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nmechanism would be implemented from 1 January 2019. The new return
\nmechanism is yet to be finally rolled out (June 2019), which is two years after
\nintroduction of GSTR-3B as a temporary measure. With the delay in framing
\na revised return mechanism, the summary return GSTR-3B, which is more of a
\nself-declaration continued since the roll out of GST instead of the system-
\ngenerated return based on verified invoices.
\nThe processes and returns kept in abeyance have been shown in red colour in
\nthe flow chart No.3 depicting current status of returns.
\nChart <\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nITC claimed by the taxpayers was not system verified and ITC ledger was
\ngetting auto populated based on un-verified ITC flowing from self-assessed
\nsummary monthly return (GSTR-3B) filed by the taxpayers.
\n\u2022 No self-regulating system
\nAs ITC and monthly returns were not based on system-verified details, the
\nself-regulating system was not in place. Further, in the originally envisaged
\n14
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nreturns mechanism, it could be verified if the suppliers have paid their overall
\ntax liability as emanating in GSTR-3 from the matched outward and inward
\nsupplies, as taxpayer had to furnish payment details while filing GSTR-3. No
\nsuch check could be in-built into the summary self-assessed GSTR-3B.
\nManual check of details in returns
\nIn the absence of a self-regulating system, data analytics and Business
\nIntelligence tools were being used by the tax departments to cross check data
\navailable in GSTRs 1 and 3B as <\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nsupplies.
\nThe discontinuation of GSTR-2 and 3 has complicated the process of filing
\nannual returns as very limited data from GSTR-2A and 3B would auto
\npopulate the annual return. The taxpayers are required to tally the data
\navailable in GSTR-1 being filed with their GSTR-3B before finalising the annual
\nreturn.
\nIt was originally envisaged in the GST Acts that the annual return pertaining
\nto a financial year would be filed by the following 31 December. The due date
\nfor annual return of 2017-18 has been extended from time to time and the
\ndate has been finally extended to 31st August 2019.
\nIt was envisaged in the GST law that any unmatched credit in the monthly
\nreturns should be rectified only up to the filing of annual return or filing of
\nreturn for the month of September of the financial year whichever is earlier.
\nThe last date for claiming ITC on invoices relating to Financial Year 2017-18
\noriginally was September of the financial year or<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nto plug revenue leakages through data analytics and Business Intelligence (BI)
\ntools. Though envisaged as a self-correcting system, the Ministry has held
\nthat due to difficulties to trade and industry, the system was being fine-
\ntuned.
\nThus, the self-correcting system, as originally envisaged, was not in place
\nand this led to continuation of avoidable assessee-tax officer physical
\ninterface instead of IT based interface. This goes against the objective of
\nreducing the avoidable physical interface to minimum, if not eliminated
\ncompletely.
\n(f) Other envisaged self-policing mechanisms
\n\u2022
\nNon-implementation of reverse charge mechanism for supplies by
\nunregistered person
\nGenerally, the supplier of goods or services is liable to pay GST. However, in
\nspecified cases, the liability to pay tax is on the recipient of supply of goods or
\nservices instead of the supplier, which is called the reverse charge. The GST
\nActs provide that wherever a registered person procures sup<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nmade.
\nTax Deduction at Source
\nSection 51 of the CGST Act, 2017, provided for Tax Deduction at Source (TDS)
\nby the Government departments, Local authority and the Governmental
\nagencies. TDS is applicable for payments above 2.5 lakh.
\nTDS provisions were postponed from time to time. The reasons for this
\npostponement, as mentioned in the 18 th GST Council meeting minutes, were
\nlack of preparedness of the Government agencies to deduct TDS and the
\nneed for TDS to be linked to fund settlement mechanism of respective States.
\nIt was also pointed out that since GSTR-2 was not getting filed, the TDS
\nbenefit could not be passed on to the taxpayer.
\nTDS provisions were finally made operational from 1 October 2018. Tax
\ndeductors were supposed to file a return by 10th of the succeeding month.
\nHowever, the due date for this return for the months of October 2018 to
\nDecember 2018 was extended 10 to 31 January 2019 stating that certain
\noperat<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nprocess of TDS.
\n9
\nNotifications No. 10\/2018-Central Tax (Rate) dated 23 March 2018, No. 12\/2018-Central
\nTax (Rate) dated 29 June 2018 and No.22\/2018-Central Tax (Rate) dated 6 August 2018.
\n10 Order No.4\/2018-Central Tax dated 31 December 2018.
\n17
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\n(g)
\nPartially rolled out GST Portal
\n11
\nFor implementing the project, GSTN prepared Project Management Plan in
\nwhich various use-cases \u00c2\u00b9\u00c2\u00b9 and functionalities of different modules were
\nplanned with timelines for implementation. The implementation of GST
\nportal was conceived to be implemented in three phases as discussed below.
\nPhase-I
\nPhase-I consisted of taxpayer registration, taxpayer registration approval,
\nInvoice upload, Payments, Return, Input Credit reconciliation, IGST
\nSettlement, MIS Reports, System Administration, Security Management and
\nHelp Desk.
\nThe functionalities for this phase of the project, as envisaged in the Softwar<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nstarting from January 2017 to March 2019. SRS for most of these modules,
\nhowever, were signed off between January and September 2018 and SRS of
\ntwo modules (MIS and Audit) was yet to be signed off. 103 use cases of this
\nPhase were to be taken into UAT environment by October 2018. However, we
\nnoticed that only 87 use cases were implemented as of January 2019.
\nThese delays had an impact on implementation of GST which could be clearly
\nseen in case of the refund module as detailed below: –
\n11
\n12
\nA use case is a list of actions or event steps typically defining the interactions between a
\nrole and a system to achieve a goal.
\nUAT is the last phase of the software testing process. During UAT, virtual software users
\ntest the software to make sure it can handle required tasks in real-world scenarios,
\naccording to specifications.
\n18
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nThe module for processing the refund of <\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\noriginally envisaged, was made available on the GST portal for one category
\nof refunds (viz. Exports of services- With payment of Tax) in October 2017
\nand for the remaining seven categories \u00c2\u00b9\u00c2\u00b3 during August to October 2018. The
\nback office module relating to online processing of refunds was not ready
\n(May 2018).
\n13
\nAs per the phase wise implementation plan of GSTN, the crucial module of
\nrefund was originally planned for phase II. On the recommendation of the
\nGST Council and the instructions of the Gol, the work on Refund functionality
\nwas commenced along with Phase I. As the module was not ready, however,
\nmanual processing of refunds continued.
\nThe automated refund application which would be made
\navailable online to tax officer, was introduced in most of the
\ncases more than one year after the roll out of GST, while the
\nprocessing of refunds was still being done manually except
\nrefund of IGST paid on export of goods. This poi<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nanomalies in database and comparison of data like GSTR-1, GSTR-3B, e-way
\nbill data to find out ITC mismatch and other anomalies. As per Request for
\nProposal (RFP), the execution plan of BI was to be finalised based on the
\nrequirement for reports. GSTN was in the process of identifying the required
\nBl reports as of October 2018 and hence, the execution plan was under
\npreparation stage only, with no timelines finalised for implementation.
\nResponse of GSTN to partial roll out of GST portal and our comments
\nWhen we pointed out (November 2018) the status of phase-wise
\nimplementation of GST portal, GSTN stated (January 2019) that GST was to be
\nrolled out from July 2017 and there were changes subsequent to signing-off of
\nSRS in December 2016. Therefore, implementation of the functionalities of
\nPhase-I was re-prioritised. For both Phases I and II, in view of the frequent
\nchanges in rules, notifications and decisions<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nthe activities given by the GST Council \/ the Government.
\n20
\n20
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nGSTN in its response endorsed by DoR (June 2019) stated that the
\npreparation of IT Business Processes of Registration, Payment and Return had
\nstarted on the basis of draft Business Process Document and Model GST Acts,
\nwhich were provided during April to October 2015 and June 2016. Thereafter,
\nGST Rules were placed in the public domain in December 2016 and January
\n2017. These were not complete rules and the same were published for
\ncomments of the public. After receiving feedback from the taxpayers and tax
\nconsultants, and other stakeholders, these rules had undergone changes.
\nTherefore, significant changes in the processes that were provided in 2015
\nand June 2016 were inevitable. Though GSTN had done proper planning and
\nmonitoring mechanism were in place, however, due to evolving nature of
\nLaw and rules there has b<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nalso being regularly monitored by DOR, which was aware of the timelines for
\nGST roll out. Inadequacies in the system show that there was a failure in not
\njust system design but its testing by GSTN and acceptance by the tax
\ndepartments before a pan-India roll out. As such, the executive who have
\nendorsed the system as developed is equally accountable for the problems
\nbeing faced.
\n1.6.3 Conclusion and Recommendations:
\nThe implementation of GST in India is perhaps the biggest tax reform in the
\nworld and the effort made by all the stake holders, including the Central
\nGovernment, the State Governments, DOR, CBIC, GSTN, MSP and those of
\nbusinesses which were ready, that made it possible is commendable. The
\nadvent of GST has provided a common national market for goods and
\nservices and paved the way to reduce tax cascading by providing ITC across
\nthe value chain of supply of all goods and services barring a<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nRecommen
\ndation
\nNeed to simplify tax compliance by introducing simplified invoice matching
\nand return forms duly using technological solutions
\nThe complexity of return mechanism and the technical glitches resulted in
\nroll back of the originally envisaged system-verified ITC based on invoice
\nmatching, using GST returns (GSTRs-1, 2 and 3). The summary self-assessed
\nGSTR-3B return, introduced as a stop-gap measure has continued. Thus the
\nsystem as in vogue today is an unverified return, without an IT based
\nchecking of invoices and is prone to ITC frauds. The self-correcting system, as
\noriginally envisaged, is not in place and this has led to continuation of
\navoidable assessee-tax officer physical interface instead of IT based interface.
\nWithout invoice matching and auto generation of refunds, assessments etc.
\non the whole, the envisaged GST tax compliance system is non-functional.
\nThe settlement of IGST to the States also is impacted as the IGST settleme<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nRules and was fraught with operational deficiencies and system design
\ndeficiencies in certain areas as brought out in our IT audit findings reported in
\nChapter III of this report.
\nThe system of payment and settlement of tax that was envisaged for GST was
\nbased on one hundred per cent invoice-matching and availment of input tax
\ncredit, as well as settlement of IGST on the basis of invoice-matching.
\nNeither is possible as of now, as an invoice-matching system has not kicked-
\nin. Invoice-matching is the critical requirement that would yield the full
\nbenefits of this major tax reform. It would protect the tax revenues of both
\nthe Centre and the States, it would lead to proper settlement of IGST and
\nwould minimise, if not eliminate, the tax official-assessee interface. In fact,
\neven “assessment\u201d in the sense understood in the manual system may no
\nlonger be necessary (returns themselves can be generated by a system that
\nmatches invoices); and cases of evasion etc., c<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n(in crore)
\n2016-17
\nTax component
\n(Pre GST)
\n2017-18
\n(Post GST)
\nA. Total Revenue Receipts
\n22,23,988
\n23,64,148
\ni. Direct Tax Receipts
\n8,49,801
\n10,02,738
\nii. Indirect Tax Receipts including other taxes
\n8,66,167
\n9,16,445
\niii. Non-Tax Receipts
\n5,06,721
\n4,41,383
\niv. Grants-in-aid & contributions
\n1,299
\n3,582
\nB. Miscellaneous Capital Receipts
\n47,743
\n1,00,049
\nC. Recovery of Loans and Advances
\n40,971
\n70,639
\nD. Public Debt Receipts
\n61,34,137
\n65,54,002
\nReceipts of Government of India (A+B+C+D)
\nSource: Union Finance Accounts of respective years.
\n84,46,839
\n90,88,838
\nThe overall receipts of the Union Government increased by Rs.6,41,999 crores
\nin 2017-18 over 2016-17. The share of Indirect taxes in total revenue receipts
\nremained almost constant, accounting for 38.76 per cent in 2017-18, as
\ncompared to 38.95 per cent in 2016-17. The Indirect taxes registered a
\ngrowth of 5.80 per cent in 2017-18 over 2016-17, while <\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nestimates and the provisional figures of 2018-19 also indicate that CGST
\nrevenue did not meet the target of RE which is reduced by One lakh crore
\nrupees as compared to original BE of CGST. The details of IGST are discussed
\nin succeeding para.
\n2.1.3 Accounting and treatment of IGST
\nIGST, a levy on inter-state supplies and import \/ export of goods and services,
\nis levied and collected by the Government of India and apportioned between
\nthe Union and the States as prescribed in the IGST Act. IGST is initially
\ncollected under Major Head 0008 in Consolidated Fund of India and then
\nonce taxpayer uses this as ITC to pay CGST \/ SGST \/ UTGST on further supply
\n(here in after referred to as ITC cross utilisation), the amount is transferred
\nfrom IGST to relevant head of account viz. CGST \/ UTGST under CFI or to SGST
\nhead of State Government concerned. Also, when ITC of IGST is rendered
\nineligible for further utilisation for any rea<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nIGST on Import \/
\nExport of Goods
\nand Services
\n0008-02
\nIGST on Domestic
\nSupply of goods
\nand services
\n1,80,485
\n(in crore)
\nTotal
\n2,02,141
\n3,82,626
\nITC Cross utilization
\nNil
\n(-)1,45,350
\n(-)1,45,350*
\nApportionment of IGST
\nNil
\n(-)25,587
\n(-)25,587*
\nBalance after settlement
\n2,02,141
\n9,547
\n2,11,688
\nand apportionment
\nAdvance apportionment
\nNil
\n(-)35,000
\n(-) 35,000
\nBalance after advance
\n2,02,141
\n(-) 25,453
\n1,76,688
\napportionment
\nShare assigned to the
\nStates (Devolution)
\n(-) 67,998
\nNil
\n(-)67,998
\n1,34,143
\n(-)25,453
\n1,08,690
\n*Correctness of IGST settlement and apportionment are subject to the
\ninaccuracies and deficiencies in IGST settlement \/ apportionment algorithm,
\nidentified as part of findings of IT audit of GSTN, have been reported in
\nChapter III of this report.
\nAs could be seen from table No.4, against a collection of 1,80,485 crore
\nunder Sub Major Head 02 (IGST on Domestic Supply of goods and services),
\n1,45,350 crore was transferred out of IG<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\ninstalments against regular settlement due to the States in 2018-19.
\nAfter this advance settlement, there was a balance of Rs.1,76,688 crore left in
\nIGST at the end of the year. Gol has devolved 67,998 crore under IGST to
\nthe States\/UTS adopting Finance commission formula for devolution of
\ncentral taxes. Devolution of IGST is in contravention of the provisions of
\nConstitution of India as Article 270 (1) of the Constitution excludes duties
\nlevied under Article 269 (A) (i.e. IGST) from list of taxes and duties to be
\ndistributed between the Union and the States. When the Ministry sent the
\naccounting procedure for IGST to CAG for approval, the procedure for
\nadvance apportionment of IGST to the Centre and the States, as
\nrecommended by the GST council was agreed to by the CAG. But the
\nprocedure for devolution was not agreed to by the CAG stating that
\ndevolution of IGST was against the provisions of Constitution of India.
\nFurther, devolution of funds using<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nThe reply of the Ministry is silent on the aspect of corrective action taken by
\nit for setting right the IGST amount devolved during the year 2017-18. Steps
\nlike amendment of Section 49 (5) of IGST Act providing for faster utilisation of
\nIGST and provisional settlement of IGST balance during 2018-19 will only
\nimpact the settlement of IGST from 2018-19 onwards. The reply of the
\nMinistry was also silent on the aspect of impact on state revenues due to
\nadoption of Finance Commission formula for distribution of IGST balance.
\nIt would be pertinent to mention here that in CAG's report on Account of the
\nUnion Government (Report No.2 of 2019), tabled in Parliament on 12
\n28
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nFebruary 2019, it was advised that Gol needed to account for its share
\ncorrectly and devolution should take place from Central share only and that
\nthe remaining 50 per cent should be apportioned <\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nMarch itself in case of Central Excise and Service Tax. Hence for a reasonable
\ncomparison of revenue growth of indirect taxes, we considered the Centre's
\nMarch 2018 GST revenue collected in April 2018 also as shown in column 4 of
\ntable No.5 given below: –
\nTable No.5: Comparison of indirect tax revenue on goods and services
\n(in crore)
\nTax components
\n2016-17
\nYear
\n2017-18
\n2017-18*
\nCentral Excise on Goods other than
\nPetroleum and Tobacco
\n1,16,901
\n9,034
\nService Tax
\n2,54,499
\n81,229
\n9,034
\n81,229
\nCentral GST Taxes (CGST and UTGST)
\n0
\n2,04,896
\n2,37,075
\nIGST**
\n0
\n1,08,690
\n1,08,690
\nCVD and SAD of Customs
\n1,51,927
\n43,092
\n43,092
\nCentral Sales Tax
\nSubsumed items revenue
\n495
\n5,23,822
\n102
\n4,47,043
\n102
\n4,79,222
\nRevenue difference for GST subsumed
\nitems in 17-18 over 18-19
\n-76,779
\n-44,600
\nRevenue difference for GST subsumed
\n-15
\n-10
\nitems in 17-18 over 18-19 (per cent)
\n* Including March 2018 GST collected in April 2018
\n** year-end balance reta<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nnoticed that there was a short transfer of Rs.6,466 crore of Compensation Cess
\nto the Public Account. It was further noticed that as per the agreed
\naccounting procedure, GST Compensation Cess should be transferred to the
\nPublic Account by debiting major head 2047-Other fiscal services, Minor
\nHead 797-Transfer to reserve fund. However, as per the Finance Accounts
\n2017-18, no such entry was found in the major head 2047.
\nThe reasons for the same were called for (February 2019) from the Ministry
\nand their reply was awaited.
\n2.1.6 Transition Credit, Refunds and Cost of collection
\nThe Statistics on (a) Transitional credits, (b) Refunds claimed by taxpayers,
\nprocessed and pending and (c) Cost of collection have not been provided by
\nthe Ministry. Hence we could not analyse the same and include in this report.
\n2.2 GST Registrations
\n2.2.1 Pan-India GST Registrations
\nThe category-wise registrations under GST have been given in table No.6
\nbelow:-
\nTabl<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nwhile balance were new registrations.
\nThe following chart No. 5 depicts the distribution of normal taxpayers and
\ncomposition taxpayers across the top 16 States\/Union Territories (UTS),
\nconstituting 90 per cent registration under these two categories: –
\nChart No.5 Normal Vs. Composition taxpayers
\nNormal Taxpayers Vs. Composition Taxpayers
\n(16 States\/UTS covering 90% of registrations in these two categories)
\n1.12
\n0.91
\n0.19 1.12
\n13.64
\n0.80 1.61
\n11.00
\n8.54 8.53
\n7.20 7.01
\n5.76
\n5.45
\n0.25
\n0.65
\n0.58 0.46 0.92
\n0.49 1.12
\n\u00e2\u2013\u00a0\u00e2\u2013\u00ac\u00e2\u2013\u00ac\u00e2\u2013\u00ac\u00e2\u2013\u00ac\u00e2\u2013\u00ac\u00e2\u2013\u00ac4.193.42 3.13 3.00 2.99 2.88 2.76 2.17
\n8.83
\nHaryana
\nMadhya Pradesh
\nTelangana
\nPunjab
\nBihar
\nKerala
\nAndhra Pradesh
\nOdisha
\nOthers
\n1.89
\n31
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\n2.2.2 Distribution of normal taxpayers
\nThe
\ndistribution of Graph No.1: Distribution of normal taxpayers
\nnormal taxpayers across
\nIndia as o<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\ncent) and Maharashtra (8.9
\nper cent). Fifteen States\/UTS
\nfigured in less than one per
\ncent category.
\nComposition taxpayers
\nBelow 1%
\nBetween 1-2%
\nBetween 2-5%
\nBetween 5-10%
\nOver 10%
\nSource: Statistical data obtained through GSTN reports as
\non 28 February 2019
\n32
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\n2.3
\nGST Return filing pattern
\n2.3.1 Filing pattern of GSTR-1 and 3B
\nThe trends of filing of GSTR-1 and 3B as on 28 February 2019 for the period
\nfrom April 2018 to December 2018, as compiled from the summary reports
\nshared by GSTN, have been depicted in table No.7 : –
\nTable No.7: – Filing pattern of GSTR-1 and 3B
\nReturn
\n\u00d0\u00a2\u00d1\u0192\u00d1\u20ac\u00d0\u00b5
\nGSTR-1
\nGSTR-3B
\nDue for
\nMonths
\nfiling
\nReturns
\nfiled
\nReturn
\nfiling
\nper cent
\nDue for
\nfiling
\nReturns filed
\nas on 28 Feb
\nReturn
\nfiling
\nReturns
\nfiled
\nPer
\ncent
\nby
\nfiled by
\n2019
\nper cent
\ndue date
\ndue date
\nApril'18
\n44,96,316
\n27,28,772
\n61 88,17,798
\n76,94,460
\n87
\n56,38,813
\n64
\nM<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\ncompliance would improve as the system would stabilize with passage of
\ntime, it was seen that there was no improvement in filing of GSTR-3B by due
\ndate.
\n33
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nChart No.6: Filing of GSTR-1 and 3B for April to December 2018
\n90%
\n87%
\n86%
\n85%
\n84%
\n83%
\n85%
\n83%
\n83%
\n80%
\n79%
\n80%
\n75%
\n70%
\n76%
\n64%
\n65%
\n63%
\n62%
\n60%
\n61%
\n59%
\n55%
\n72%
\n68%
\n59%
\n58%
\n58%
\n66%
\n65%
\n64%
\n61%
\n63%
\n58%
\n57%
\n50%
\nApr-18
\nMay-18
\nJun-18
\nGTR-1 Return Filing %
\nJul-18
\nAug-18
\nSep-18
\nGSTR-3B Return Filing %
\nOct-18
\nNov-18
\n-GSTR-3B % filed by due date
\nSource: Statistical data obtained through GSTN reports as on 28 February 2019
\n\u2022
\n\u2022
\nDec-18
\nThe filing percentages of GSTR-1 returns were throughout less in
\ncomparison to the corresponding filing of GSTR-3B returns during the
\nperiod April 2018 to December 2018. The introduction of GSTR-3B
\nresulted in filing of retu<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nagainst 45 lakh and 47 lakh taxpayers due to file GSTR-1 for April and May
\n2018 respectively, only 27 lakh taxpayers filed these returns. But for the
\n34
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\n\u2022
\nmonth of June in which taxpayers with turnover below 1.5 crore were
\nalso due to file returns (i.e. quarterly returns), the total taxpayers due to
\nfile GSTR-1 increased to 93 lakhs against which GSTR-1 was filed by 70
\nlakh people. Similar trend could be seen in the next two quarters also.
\nQuarterly hike in filing rates of GSTR-1 might happen either
\ndue to (i) small players being better compliant to filing
\nGSTR-1 as compared to those with turnover above
\n1.5 crore or (ii) due to those with turnover above
\n1.5 crore also filing quarterly return instead of monthly
\nreturns.
\nMinistry was requested (April 2019) to examine the reasons for this trend
\nand to provide break up of taxpayers with turnover above and below
\n1.5 crore<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nAssam
\nJharkhand
\nWest Bengal
\nGSTR-3B: Dec-18
\nOdisha
\n48%
\nChhattisgarh
\nMadhya
\nPradesh
\nGujarat
\nDaman and Diu
\nDadra
\nand Nagar
\nHaveli
\nMaharashtra
\nKarnataka
\nGoa
\nLakshadweep
\n37%
\n33%
\nKerala
\nTamil Nadu
\nPuducherry
\nAndaman and Nicobar Islands
\nTelangana
\nAndhra Pradesh
\n-GSTR-1: Dec-18
\nGSTR-1: All India Average of Dec-18
\nGSTR-3B: All India Average of Dec-18
\nSource: Statistical data obtained through GSTN reports as on 28 February 2019
\nThe filing of GSTR-1 across the country or the national average (returns filed
\nas a percentage of returns due to be filed) stood at 65 per cent for the month
\nof December 2018. Highest filing was noticed in Punjab (82 per cent),
\nfollowed by Gujarat and UT of Chandigarh (79 per cent). Amongst the General
\nCategory States, the filing of GSTR-1 was below the all India average in Orissa
\n(48 per cent), Bihar (50 per cent), Jharkhand (54 per cent), Chhattisgarh (56
\nper cent), Telangana (59 per cent), Goa (60 per cent), Karnataka (61 per ce<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nDecember 2018, have been given in chart No.8 below (corresponding
\nstatistical details in Appendix-IV).
\nChart No.8: Filing of GSTR-4 as on 28 February 2019
\n86%
\n85%
\n85%
\n84%
\n83%
\n82%
\n81%
\n80%
\n79%
\n78%
\n77%
\n76%
\nJun-18
\n82%
\nSep-18
\n78%
\nDec-18
\nSource: Statistical data obtained through GSTN reports as on 28 February 2019
\nWhile the filing of returns by composition taxpayers appeared to be better
\nthan the return filing rate of normal taxpayers (i.e. GSTR-1) and almost at par
\nwith filing of summary return (i.e. GSTR-3B) by normal taxpayers, Ministry
\nwas required to examine reasons for decline in filing of GSTR-4.
\nThe State wise filing rate of GSTR-4 for the quarter ending December 2018, as
\non 28 February 2019 has been given in chart No.9 below:-
\n36
\n40%
\n50%
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nChart No.9: State wise filing of GSTR-4 for December 2018
\nGSTR-4 (Quarterly) Statewise Filing Percentage Vs. All India Average<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\ncent), Maharashtra (70 per cent) and Tamil Nadu (71 per cent) were below
\nthe national average of 78 per cent. While the filing of GSTR-4 in most of the
\nSpecial Category States was below national average, J&K (76 per cent),
\nHimachal Pradesh (84 per cent) and Uttarakhand (80 per cent) registered
\nabove national average filing rates.
\n2.3.4 GSTR-5, 5A and 6
\nGSTR-5 is a monthly return to be filed by Non-resident taxpayers \/ Casual
\ntaxpayers. GSTR-5A is to be filed by those providing Online Information and
\nDatabase Access or Retrieval services (OIDAR) from outside India to non-
\ntaxable person in India. GSTR-6 is filed by Input Service Distributor (ISD)
\ngiving the details of input tax credit received and distributed.
\nThe trends of filing of GSTR-5, 5A and 6 as on 28 February 2019 for the period
\nfrom April 2018 to December 2018 has been given in chart no.10 below
\n(corresponding statistical details in Appendix-IV).
\n37
\n37
\n85%
\nReport No. 11 of 20<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nanalysed and any action taken based on such analysis. Similarly analysis done
\nor action taken in respect of filing of GSTR-6 by ISDS, which was also around
\n50 per cent, have also been sought from the Ministry. Reply was awaited
\n(June 2019).
\n2.4
\nConclusion
\nRevenue analysis
\n.
\nThe growth of indirect taxes slowed down to 5.80 per cent in 2017-18
\nover 2016-17, while this growth rate was 21.33 per cent during 2016-17.
\nPost implementation of GST, the Centre's revenue on goods and
\nservices (excluding Central Excise on Petroleum and Tobacco) registered
\na decline of 10 per cent in 2017-18 as compared to revenue of
\nsubsumed taxes in 2016-17.
\nGol resorted to devolution of IGST year-end balance to the States as per
\nFinance Commission formula, which is in contravention of the
\nprovisions of the Constitution of India and the IGST Act. This also has
\nthe impact of distribution of funds to the States on a completely
\n38
\nReport No. 11 of 2019 (Indirect Taxes – Goods and<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nGSTR-3B or to arrive at turnover.
\n39
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nChapter III: Planning and Implementation of GST IT Project
\nThis chapter deals with the results of our IT Audit of GSTN covering
\nRegistration and Payment modules and IGST settlement reports.
\n3.1
\nIntroduction
\nGST has envisaged integration of tax administration across the country, which
\nrequired a robust IT backbone. GSTN was formed to provide common and
\nshared IT infrastructure and services to the stakeholders 14 for the
\nimplementation of GST. The main objectives of GSTN included : –
\n.
\nTo assist and engage with various stakeholders in preparing IT and
\ncommunications related infrastructure for smooth roll out of any IT
\ndriven initiatives and other e-governance initiatives of the
\nGovernment or any department or agency of the Government,
\nspecifically for the roll out of the GST;
\nTo provide for smooth transitioning of the current indirec<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nCompany (the Board) should have a minimum of two and a maximum of 14
\nDirectors. The Chairman of GSTN should be nominated through a joint
\napproval mechanism of the Central Government and the State Governments.
\n14 Finance departments of Government of India and State Governments, taxpayers, CBIC,
\nState Tax Authorities, Principal Chief Controller of Accounts (PCCA), State Treasuries,
\nReserve Bank of India and authorised banks.
\n15
\nTamilnadu, Kerala, Andhra Pradesh, Karnataka, Maharashtra, Goa, Haryana, Sikkim and
\nMeghalaya.
\n41
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nThe Board would appoint a Chief Executive Officer (CEO) for managing the
\nbusiness of the company, subject to the control and supervision of the Board.
\nUnder the present organisational setup, the CEO was being assisted by
\nExecutive Vice Presidents (EVP) and Senior Vice Presidents (SVP) looking after
\ndifferent functions of the company.
\nThe strategic control of the<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nGiven the criticality of the IT infrastructure, which was to be the backbone of
\nGST, GSTN was formed in March 2013 itself. The year wise expenditure on
\nGSTN in each of these years, up to 2018-19 is as follows:
\nTable No.8 : Year-wise expenditure on GSTN
\nYear
\nActual Expenditure (* in crores)
\n2013-14
\n3.04
\n2014-15
\n12.29
\n2015-16
\n48.07
\n2016-17
\n69.59
\n2017-18
\n544.07
\n2018-19
\n427.37
\nGSTN has incurred an expenditure of 133 crore till March 2017.
\nGSTN was able to ensure that the GST IT system was up and running with
\nsome basic features on the date fixed for roll out viz. 1 July 2017. It was
\nalso able to roll out form GSTR-3B in a very short time. Therefore, the
\n42
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nshortcomings and glitches in the system cannot be ascribed to short notice
\nbefore start. Proper planning of systems that would be flexible enough to
\nadjust for changes (which ar<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nof CAG's (DPC) Act, 1971. We initiated the first IT audit of GSTN in May
\n2018, the details of which have been given in the subsequent paras.
\n3.4.2 Scope of IT audit
\nAs on 31 December 2017, when we started planning the IT audit, 50 per cent
\nof the functionalities planned for Phase I and 12 per cent of the
\nfunctionalities planned for Phase II were completed. The status of
\nimplementation of various modules in Phase I had been detailed below:-
\nTable No.9: Details of implementation of modules in Phase-I
\nas on 31 Dec 2017
\nFunctionalities
\nplanned
\nModules (grouped)
\nIn Production as
\non 31 December
\nPercent
\ncompleted
\n2017
\nRegistration
\n48
\n30
\n63
\nPayment
\n10
\n10
\n100
\nReturns#
\n37
\n17
\n46
\nReports and Stand alone
\n89
\n35
\n39
\nTotal of Phase I
\n184
\n92
\n50
\n# Included IGST Settlement Reports, which were completed by September 2017
\n43
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nAs could be seen from table No.9, Registratio<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\naudit.
\n3.4.3 Audit objectives
\nThe main objectives of this IT audit were to assess whether the IT modules
\nfor the taxpayer Registration, GST Payment and IGST settlement,
\nimplemented by GSTN, were in line with the provisions of the Acts and Rules
\ngoverning the GST regime and the SRS.
\n3.4.4 Audit Methodology
\nWe test checked the aspects of Registration, GST Payment and the IGST
\nsettlement reports in operation as on 1 May 2018.
\nWe conducted (May 2018) an entry conference with the GSTN team to
\ndiscuss our audit plan and programme followed by discussions, presentations
\nand walkthrough to understand the business process and the flow of
\ninformation through the GST IT System. We also received feedback from
\nsome stakeholders of the GST IT System, namely Principal Chief Controller of
\nAccounts (PCCA), Confederation of Indian Industry (CII) and VAT Department
\nof Delhi Government.
\nAudit testing of important forms and functionalities as envisaged in the
\nrelevant Acts a<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nsuitably incorporated in this IT audit report. The replies given by GSTN were
\nalso verified again in January 2019 and the results of the verification duly
\nincluded in this report. The findings of this IT audit were brought to the
\nnotice of the Ministry in March 2019 and the reply of the Ministry forwarding
\nthe response of GSTN was received in June 2019. The replies have been duly
\nincorporated in the report.
\n3.4.5 Audit Criteria
\nSources from where we derived the audit criteria for this IT audit included
\nthe Constitutional provisions related to GST; relevant provisions of the CGST
\nAct, the IGST Act, the UTGST Act, the SGST Acts and their associated rules and
\nregulations, notifications of the tax authorities like CBIC, relevant Business
\nProcess Documents and SRS. For ease of reference, we quoted only CGST Act
\n\/ Rule provisions but the provisions quoted and findings emanating
\ntherefrom would be relevant for similar provisions of SGST \/ UTGST \/ IGS<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nexisting in the rolled out modules were not found aligned to the
\napplicable provisions. Of these 16 cases, the required validation
\nwas not included in the Software Requirement Specification (SRS)
\nitself in seven cases, the validations were not built-in even though
\nSRS was correctly framed in eight cases and the SRS provision
\nincluded a condition not prescribed in the Act in one case.
\nAudit findings on Registration module, Payments module, IGST settlement
\nreports, Business Continuity and Change Management have been given in the
\nfollowing four parts.
\nPart A: Registration Module
\n3.6
\nIntroduction
\nIn the GST regime, registration has been made fully online and any legal
\nperson wishing to register would have to access the GST IT system for the
\nsame. While applying for a new registration, the applicant has to first fill
\nPart-A of the application form, which consists of Legal Name, Permanent
\nAccount Number (PAN) as issue<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\ngiven below:-
\n3.7
\nFailure to validate and debar ineligible taxpayers from availing
\nComposition Levy Scheme (CLS)
\n3.7.1 Same PAN holder found under CLS as well as normal taxpayer
\nThe key conditions for a registered person to opt for CLS under Section 10 of
\nCGST Act were: –
\n46
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\n(i) The aggregate turnover, on all India basis against the taxpayer's PAN,
\nin the preceding financial year should not exceed the prescribed
\namount (one crore at the time of this audit).
\n(ii) Multiple registrations under the same PAN could opt for CLS only if all
\nsuch registrations opted for the scheme.
\n(iii) The option availed for CLS would lapse with effect from the day on
\nwhich the aggregate turnover during a financial year exceeded the
\nprescribed limit.
\nTest check by Audit revealed that the system validations were not adequately
\nmapped to the above provisions of the Act as detailed below<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nwas not completed before the new taxpayers were allowed to opt in for
\ncomposition, the validation was not implemented at that point of time. They
\nreported completion of corrective action regarding 168 PAN holders
\nregistered under CLS as well as Normal taxpayers for different business
\nverticals, which remains to be verified by Audit.
\nGSTN reply could not be accepted since audit was conducted more than one
\nyear after the rollout of GST. Further, this issue was noticed in some of the
\nregistrations that happened even in July 2018. By that time, validation issues
\nif any due to migration should have been rectified by GSTN. The persistence
\nof such issues remaining in the application\/data even after intimation of
\n16 Shard-1 database consisting of Jammu & Kashmir, Delhi, Nagaland, Mizoram, Jharkhand,
\nMadhya Pradesh, Dadra and Nagar Haveli, Goa, Pondicherry and Other Territory
\n(Code-97).
\n47
\nReport No. 11 of 2019<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nimplemented by June 2019.
\nGSTN, in their reply endorsed by DoR (June 2019) cited the following reasons
\nas to why validation on the PAN based cumulative turnover was not tenable
\nat that point of time:
\n\u2022
\n\u2022
\nThe turnover limit fixed for composition scheme kept on changing
\nThe criterion to opt in for composition under VAT or Central Excise
\nbeing different in comparison to GST
\nNon-availability of the Return data based on PAN in respect of
\nmigrated taxpayers in the system
\nGSTN informed that the validations were hence kept in abeyance and have
\nbeen implemented during 2018-19.
\nThe above reply is not tenable due to multiple reasons. A field like turnover
\nlimit not being made configurable in the first place indicated faulty design of
\nthe system. Similarly PAN based turnover data not being used for validating
\ncomposition scheme indicates flaws in the way application was mapped with
\nthe applicable provisions initially. The different crit<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n3.7.2 Ineligible taxpayers allowed registration under CLS
\n(a)
\nAs per Section 10(2) of CGST Act, the taxpayers engaged in following
\nactivities were not eligible to opt for CLS : –
\n. inter-State outward supplies
\n. supply of goods through an Electronic Commerce Operator
\n(ECOM) who were required to collect tax at source under Section
\n52 of the CGST Act.
\n\u2022
\nSupplies to or by SEZ units \/ developers (treated \u00c2\u00b97 as inter-State
\nsupply).
\nA data analysis of 37,225 Composition taxpayers revealed that the data
\ncontained 679 taxpayers belonging to the above categories (Inter-state
\nsuppliers, ECOM, SEZ developers \/ units). GST IT System, thus, failed to
\nvalidate and debar these ineligible taxpayers from availing CLS.
\nGSTN had replied (January 2019) that the validations for Inter-state suppliers,
\nECOM, SEZ developers and SEZ units from opting-in for composition scheme
\nwas fixed and deployed to production on 29 June 2018 and that the data <\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nthe registered person should not be eligible to opt for CLS if such
\nperson was a manufacturer of the following goods: –
\n\u2022
\n\u2022
\nIce-cream and other edible ice, whether or not containing cocoa
\n(Tariff Heading 21050000);
\nPan Masala (Tariff Heading 21069020); and
\n\u2022 Tobacco and manufactured tobacco substitutes (Chapter 24).
\nGST IT system, however, did not restrict the manufacturers of the above goods
\nidentified through HSN codes from registering as a Composition taxpayer.
\nGSTN had replied (January 2019) that validation on this account would be
\nimplemented by July 2019 and that the approving authorities of the Centre
\nand the States were supposed to check such discrepancies at the time of
\napproving the registration application and get such errors rectified. GSTN has
\nfurther replied (June 2019 through DoR) that the necessary data captured at
\nthe time of registration was indicative and in the registration module, the
\nsystem was captu<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nensure that such critical deficiencies in application are
\ndetected and rectified before rollout to public.
\n50
\n50
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\n3.8 Issues related to other categories of taxpayers
\n3.8.1 Other Notified Persons (ONPs) for allotment of Unique Identification
\nNumber (UIN)
\nGST Acts provided for allotment of Unique Identification Number (UIN) to UN
\nbodies and Embassies to enable them to claim refund of GST paid on
\npurchases made by them. The Act also provided that the Other Notified
\nPersons (ONPs), as notified by various Central and State authorities, were
\neligible to take registration under ONPS category for allotment of UIN.
\nOrganisations like ISRO have been notified under this category. The following
\ndiscrepancies were noticed in respect registrations of ONPs.
\n(a)
\nPAN made optional for registration of ONPs
\nPAN of the authorised signatory was mandatory 18 for getting UIN under ONPS
\ncategory. Audit noticed tha<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nFor a category of Registration, which is permitted only
\nbased on specific notification(s), not having a provision in
\nplace to upload the notification at the time of registration is
\na basic deficiency in the system.
\n18
\n19
\nAs per the application form (Part-A) REG-13 under Rule 17 of CGST Rules 2017.
\nAll four shards.
\n51
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\n3.8.2 Deficiencies in Online Information Database Access and Retrieval
\nServices (OIDAR)
\nAs per Section 2(17) of IGST Act, 2017, OIDAR referred to services whose
\ndelivery was mediated by information technology over the internet or an
\nelectronic network and the nature of which rendered their supply essentially
\nautomated involving minimal human intervention. These included services
\nsuch as advertising on internet, cloud services, digital storage, online gaming.
\nThe following deficiencies were noted with regard to registration of OIDAR
\ntaxpayer<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nRegarding validation of TIN, GSTN had stated (January 2019) that single
\nauthentic data source of TIN at international level was not available as it
\nvaried from one country to the other. GSTN had also stated that the
\nfunctionality to upload document pertaining to TIN\/or identity certificate and
\ncredentials of authorised representative would be provided by June 2019.
\nAudit holds that in view of non-availability of any authentic data source of
\nTIN, it is even more important to have the facility to upload vital documents
\nneeded for registering under OIDAR category. GSTN seeking so much time to
\nbuild-in this small but critical functionality, and DoR endorsing the same, is
\nunacceptable.
\n3.8.3 Deficiencies in Registration process of Tax Deductor at Source (TDS)
\nSection 51 of CGST Act 2017 stipulated that the Government might mandate
\nthe following category of authorities\/persons to deduct tax at the rate of one
\n52
\n52
\nReport No. 11 of 2019 (Indirect Taxes – Goods<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\ncategory (iv) was masked so that it might not be selected by the
\napplicant by mistake. They had also stated (January 2019) that all the TDS
\nregistrants, who selected this option, were being advised by email to amend
\nthe category as per law through the amendment process and that another
\nround of similar exercise would be performed after removing the drop down
\nmenu.
\n20
\nThe masking of category (iv) did not hold good now in view of notification
\ndated 13 September 2018, which notified specified autonomous bodies\u00c2\u00b2\u00c2\u00ba,
\nsocieties and Public Sector Undertakings under this category. Audit advised
\n(March 2019) that GSTN should re-consider the corrective action proposed as
\nthe TDS provisions were made effective from 1 October 2018, including for
\nthe categories notified under sl. no. (iv) of section 51.
\nEven though the Government notified certain organisations under the fourth
\ncategory of TDS with effect from 1 October 2018, GSTN replied in January<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\ncondition.
\nGSTN agreed that it was a defect and stated that it had been fixed in
\nOctober 2018.
\nHowever, during verification (January 2019), we noticed deficiencies in the
\nsearch functionality even after the fix.
\n3.9.2 No option for different Languages on GST portal
\nContrary to the SRS, there was no language option for taxpayers other than
\nEnglish in the GST portal.
\nGSTN replied (January 2019) that on implementation of all the critical
\nfunctionalities, development and implementation of the multi-lingual support
\nwould be taken up on priority and might be completed by October 2020.
\nDelay in implementation of Multi-Lingual Support meant increase in
\ncompliance cost to the taxpayers who are not used to English language.
\n3.9.3 Registration for multiple business verticals
\nTaxpayers requiring separate registration for any of its business verticals
\nunder the same PAN should submit a separate application in FORM GST REG-
\n01 in respect of each such <\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n54
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nthrough DoR that the same was under development and expected to be
\nimplemented by September 2019.
\nDetails such as PAN number were the same for multiple registrations. Non-
\nimplementation of such a basic functionality resulted in losing basic
\nadvantage of having an IT system.
\n3.9.4 Jurisdiction Mapping with PIN Code not enabled
\nDuring the process of filling up Part-B of registration, while selecting a State's
\ncircle\/ward, users were allowed to select any Central jurisdiction from all
\nover India. Ideally the State and Central jurisdictions must have been
\nmapped to each other and there should have been only one Central
\njurisdiction for a specific State GST jurisdiction.
\nData analysis also showed that there were large numbers of incorrect
\njurisdictions. Out of about 14 lakh taxpayers registered in the State of UP, a
\ntotal 13,432 were either mapped with<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nalso, as brought out in paragraph 4.9.2 of chapter IV.
\n3.10 Findings accepted and corrective action taken or initiated
\n3.10.1 Technical glitches leading to delay in issuance of ARN and GSTIN, were
\nidentified by GSTN based on audit objection, were partly rectified by GSTN in
\nJanuary 2019. .
\n3.10.2 Issues regarding validation of key fields in Registration (Legal Name,
\nType of Business and CIN) with CBDT and MCA Databases pointed out by
\nAudit were identified by GSTN and it was stated (January 2019) that the same
\nwere expected to be rectified by March 2019. GSTN further stated (June
\n2019) in their reply forwarded by DoR that
\n55
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\n\u2022
\n\u2022
\n\u2022
\nValidation of Legal Name was expected to be closed by April 2019.
\nFor validation of Type of Business, the communication for the same
\nhas been sent by GSTN to the taxpayers and the list will be share<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nobservation, stated that the data fix was expected to be completed by 31
\nJanuary 2019. Further progress was awaited (June 2019).
\n3.10.5 There was no provision for raising an alert to the tax officer in case a
\nNon Resident Taxable Person (NRTP)\/Casual taxpayer had not filed for
\nregistration five days prior to date of commencement of business, as
\nrequired under Section 25 of CGST Act read with Rule 13(i) of CGST Rules.
\nGSTN implemented this feature with effect from 2 August 2018.
\n3.10.6 Based on audit observation, GSTN merged into one, the two separate
\nportals\u00c2\u00b2\u00c2\u00b9 that existed for complaint \/ grievance redressal, without any specific
\npurpose for such separate portals.
\n3.11 Conclusion on Registration Module
\nRegistration being the first step in tax administration and given the IT
\nintensive system that GST was designed to be, Ministry should have ensured
\nthat a fool-proof Registration module was in place. The IT audit of
\nRegistration module revealed tha<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\ngiven effect in the IT system.
\nCBIC's reply to the IT audit findings was that the issues raised pertained to
\nGSTN and a reply should be sought from DoR. The fact remained that CBIC,
\nas a stakeholder of GST IT system, has a key role to play in proper design
\nand development of system by GSTN as well as in strengthening the system
\nby ensuring removal of deficiencies pointed out by audit. CBIC, being a part
\nof DOR, asking audit to seek a reply from DoR also points towards lack of co-
\nordination between DoR and CBIC with reference to functioning of GSTN.
\nAudit found (May to October 2018) that certain basic validations were absent
\nin the GST Registration module, most of which has been in use since the
\nbeginning of GST. The timelines initially indicated by GSTN in January 2019
\nto fix these validations were extended further in their reply sent through
\nDoR in June 2019. This shows that fixing these deficiencies was neither
\nprioritised by GSTN nor insisted by DOR<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n57
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nChart No.11: Payment process for e-payments
\n13. Successful\/ Failure on Browser
\nGST IT System
\nGST Portal
\n1. User clicks on make
\nPayment
\non GST Portal
\n2. encrypted data to User's browser
\n9 b.browser redirects to GST Portal
\n3. Browser redirects
\nBank IT System
\n9 a. Responds to user browser
\nBank
\nPortal
\n12. Responds with
\nSuccess\/failure
\n10. GST portal sends
\ndata to process
\nGST Core
\nSystem
\n5. Calls validateCPINData(trxnld,hmac)
\n6. Responds with Success\/Fail
\n11. Processes
\n4. Bank Portal sends
\nserver to process
\nBank
\nServer
\n8. Responds to portal
\n7. Bank Processess
\nThe GST portal receives the e-scroll from RBI on the next day (T+1)\u00c2\u00b2\u00c2\u00b2. The
\nportal carries out reconciliation between the e-scrolls received from RBI and
\nthe challan details available on the GST portal and reports the reconciliation
\nresults to the Accounting Authorities in Reconciled and Non-r<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nHowever, analysis of payment data showed that in 80,816 cases, the
\npayment date and the date on which the transaction was credited to the ECL
\nof taxpayer were different. There were delays of more than three days in
\n10,088 cases. Of these, the delays were to the extent of five days in 3,345
\ncases and of ten days in 1,228 cases.
\nGSTN had informed (January 2019) that in majority of cases, the ECL got
\ncredited either on real time basis or via On-Demand-Calls made automatically
\nto the banks in case taxpayers closed the browser before the payment process
\nwas completed.
\nHowever, despite all these arrangements, a few payments were still not
\ngetting updated in ECL because of various reasons. The breakup of 10,088
\ntransactions pointed out by audit where there had been delay of more than
\nthree days, as explained by GSTN, had been given below : –
\n(i)
\n2,658 transactions related to the period prior to the date of r<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\ndeducted from their bank accounts, defeated the objective of providing
\ntimely credits to the taxpayer. It could lead to unnecessary demands being
\nmade on a taxpayer to pay the taxes and hence the need to sort and settle
\nthe payment system fully.
\n3.13.2 ECL getting updated without confirmation from banks
\nAs prescribed in the Business Process for Payment, it was included in SRS that
\nthe GST portal had to update the ECL of the taxpayer after confirming the
\npayment from the authorised banks. However, there were transactions where
\n59
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nCIN was reported by the authorised banks to the RBI but not to the GST Portal.
\nAudit noticed that in such cases, ECL was getting credited based on e-scroll
\ndata from RBI without confirming the payment from authorised bank.
\nGSTN informed (January 2019) that the details were there in e-scroll of RBI
\nwhich meant that the tax amou<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nbeen flagged by GSTN in October 2017. No reply has been received from DoR
\n(June 2019) to this issue. Rather than continuing such an ad-hoc
\narrangement, DoR has to set the process right by taking a decision to ensure
\nproper accounting and reconciliation.
\n3.14 Non-implementation of service requirements of banks
\nThe Joint Committee for Business Process on GST Payment recommended the
\nfollowing minimum service requirements for the banks, which had not yet
\nbeen implemented: –
\nThere should be an assurance that all transactions credited to
\nrespective CGST, IGST, Additional Tax and SGST Accounts were being
\nreported to RBI and no balances were left in these accounts.
\nNew parameters of bank performance including timely remittance
\nand reporting of error-free data to all the stakeholders were to be
\ndeveloped.
\nA system of incentives \/ penalties (on banks) was to be administered
\nby the respective Accounting Authority if defaults arose<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nthe part of authorised banks as explained in paragraph 3.13.
\nGSTN had informed (January 2019) that they took up this matter with the
\nPrincipal Chief Controller of Accounts (Pr. CCA), who, in turn, initiated
\n(December 2018) discussions to finalise the service\/audit and other issues
\nrelated to the banks. GSTN further stated in their reply sent through DoR
\n(June 2019) that the payment success ratio for internet banking payment,
\npresented by GSTN in a meeting held in December 2018, has been circulated
\nto all the banks individually as per instructions of PCCA.
\nThe shortcomings mentioned above pointed towards lack of coordination
\nbetween various agencies and inadequate monitoring on the part of Ministry
\nof Finance (MoF). MoF has to take up this issue on priority.
\n3.15 Non-reconciliation with accounting authorities
\nPayment data with the PCCA showed that receipt of 244 CINS pertaining to
\n2017-18 for an amount of Rs.3.58 crore and 136 CINS pertaining to April<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nthese issues need to be rectified on a priority basis.
\n3.16 Non-acceptance of payment where payment details were
\nreceived after expiry of Challan
\nSRS for Payment Module envisaged a scenario where a payment was initiated
\nbut no response was received from the bank and subsequently bank sent CIN
\ndetails after the challan had expired (i.e. for the expired CPIN). In such a
\nscenario, it was prescribed that the GST IT system should accept this payment
\nonly if payment date was within the validity period of challan i.e. within 15
\ndays from the date of challan generation.
\nAudit noticed that there were seven cases of e-payments and OTC (over the
\ncounter payments) where the payment was initiated within 15 days (when
\nCPIN was active) but the payment was completed (CIN generated) after 15
\ndays i.e. payment date was after the expiry date. However, GST IT system did
\nnot recognise these transactions as successful payments. Non-cre<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n'Record Level Total', 'Major and Minor Head Totals' and 'Checksums'. There
\nwas a risk that in the absence of these system level controls, the
\ncompleteness and accuracy of transmission of files might not be adequately
\nvalidated.
\n62
\n62
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\nGSTN had informed (January and June 2019) that the payment module was
\ndesigned as per the approved Business Process Document and the BARM
\n(Bank Authorization Reference Model), which did not prescribe the control
\ntotals. On approval of PCCA, the control totals, as suggested by the audit,
\nwere expected to be implemented by September 2019.
\nThus, basic application controls, required to ensure integrity
\nof data transfer, were not considered while designing the
\nsystem.
\n3.18 Payment through debit\/credit cards not provided in the GST IT
\nsystem
\nThe modes of payments specified in the GST Act included paymen<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\ntransaction status had to be kept as \u2018Initiated' until a response was received
\nfrom bank\/e-Scroll or Challan expired. In such a scenario, taxpayer had to
\nbe displayed the message 'No response from the Bank'. However, audit
\nnoticed that in case of no response from bank, system showed the status as
\n'Failed' instead of 'No response from the Bank'. If appropriate message was
\nnot displayed, there was a risk that the taxpayer might initiate the payment
\nby generating another challan.
\nSimilarly, on expiry of 15 days from the date of CPIN, the status of challan
\nwas to be changed to 'Expired'. However, data analysis of sampled database
\n(Shard-1) revealed that status of 19,842 challans was shown as 'Initiated'
\n63
\nReport No. 11 of 2019 (Indirect Taxes – Goods and Services Tax)
\neven after the expiry of the challan when ideally the challan status should
\nhave been shown as 'Expired.'
\nGSTN had intimated (January 2019) that the change requirement for taking
\ncare o<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\ncards could not be made available as Ministry had not decided on how to
\ndeal with the financial implications.
\nPart C: IGST Settlement reports
\n3.21 The Provisions for IGST Settlement
\nSection 18 of the IGST Act specified that on utilisation of Input Tax Credit
\n(ITC) of IGST for payment of CGST or STGST\/UTGST, the Central Government
\nshould transfer the ITC amount from IGST account to CGST or SGST \/ UTGST
\naccount in such manner and within such time as may be prescribed. Further,
\nSection 17 of the IGST Act provided that where ITC of IGST was rendered
\nineligible for further utilisation for any reason or lapse (breaking of ITC chain),
\nthe same should be apportioned between the Union and the States.
\nCentral Government notified GST Settlement of Fund Rules, 2017 (GSTSF
\nRule) to apportion the IGST amount between the Union and the States. As
\nper these rules, GSTN was to prepare the following 23 settlement reports and
\ntransmit them to the ta<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nSGST\/ UTGST portion of IGST collected on supplies imported by
\nunregistered persons.
\nSGST\/UTGST portion of IGST for supplies imported by Composition
\ntaxable persons\/UIN holders.
\nSGST\/UTGST portion of IGST collected on goods\/services imported
\nby registered person (other than composition) where ITC is declared
\nas ineligible.
\nSGST\/UTGST portion of IGST collected on goods imported by
\nregistered person where ITC remains unutilised till specified period.
\nSGST\/ UTGST portion of interest related to returns paid on IGST.
\nMonthly reports containing State-wise details containing list of
\nregistered persons who have adjusted liability of Central Tax from the
\nITC of Integrated Tax; this contains summary reports from table 2.02.
\nMonthly reports containing State-wise details containing list of
\nregistered persons who have adjusted liability of Central Tax from the
\nITC of Integrated Tax, as provided under section 18 of the IGST Act.
\nMonthly State-wise conso<\/p>\n