Indian Government Accused Of Rolling Out Untested GST System

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The Goods and Services Tax, aka GST, launched on July 1, 2017, saw its first audit by the CAG. The audit report spills bean that is no less than a surprise. It reveals that the government was inadequate to test the GSTN system before rolling it out to the public. Consequently, the system turned out to be a deficit.

According to The Hindu, the Comptroller and Audit General presented the report in the Parliament on Tuesday. The report states that even after two years of GST, the invoice matching system, which is the backbone of the tax system, has not found its proper place.

It was mentioned in the report that the number of filed IT returns has decreased in the past few months. “Even after two years of rollout of GST, system validated Input Tax Credit through ‘invoice matching’ is not in place and the non-intrusive e-tax system still remains elusive,” the report said.

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The CAG said, “The complexity of the return mechanism and the technical glitches resulted in a rollback of invoice-matching, rendering the system prone to ITC [Input Tax Credit] frauds. Without invoice matching and auto-generation of refunds, assessments, etc. on the whole, the envisaged GST tax compliance system is non-functional.”

According to the CAG, the new changes under consideration now and making the invoice matching system dormant, points towards non-cooperative attitude between the Department of Revenue, the Central Board of Indirect Taxes and Customs and the GST Network.

The CAG also mentioned that the government did not follow the protocols for transferring revenues to the States. The GST amount transferred in the year 2017-18 clashed with the rules meant for such a transfer.

Times of India reported that the tax revenues also slowed down during the first year of GST rollout. The report mentioned a downshift of 5.80% in the growth of indirect taxes of the central government in the year 2017-18 as compared to 21.33% during 2016-17. This also saw a 10% douse in the governments’ revenue from goods and services.

The CAG said that the invoice matching system is the key point in the payment and settlement of tax along with the settlement of IGST under GSTN. All the undergoing reforms in the tax system can display full effect only after an adequate invoice matching system.

The report mentions that the Central Board of Direct Taxes should also check whether the mistakes were just errors or it was a case of commission. The ITD should take proper action for the latter.

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According to The Wire, the technical issues in the system and the complicated returns mechanism consequently led to the rollback of the invoice matching. This also made the system inclined towards the input tax credit frauds.

A good invoice matching system will protect the revenue of the Centre as well as the State. It will also lead to a befitting settlement of IGST. Furthermore, it would minimize the physical interaction between the tax-official and the assessee.

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