India’s Comptroller and Auditor General (CAG) before Parliament admonished the government for being slow in implementing technology and simplified filing process for Goods and Services Tax (GST) as it said detecting evasion has improved. Report No 1 of 2021 on “Indirect Taxes – Goods and Services Tax, Central Excise and Service Tax” said the amount of cases detected via anti-evasion activities had improved 72% between FY18 and FY19 from ₹38,686 crore to ₹66,507 crore and 49% between Financial Year (FY) 2016-2017 and FY 2017-2018.
The Ministry attributed the significant increase in the number and amount of cases detected through anti-evasion activities to increase in the tax base owing to GST implementation whereas issuance of fake invoices for passing on a substantial amount of Input Tax credit by unscrupulous taxpayers; and setting up of Directorate General of Analytics and Risk Management (DGARM), which is entrusted with the functions of analysing big data, the outcomes of which were intermittently shared with the DGGI.
While instances of voluntary payment had also increased by 8% in FY19, data shows that as a percentage of amount detected via anti-evasion activities, the ratio had declined for Directorate General of Goods and Service Tax Intelligence (DGGI) and GST commissionerate for cases of service tax and GST. In the case of services tax, voluntary payment was received in 13.5% of the total amount, a decline from 14.8% in FY18 and 42.2% in FY15. On the other hand, for GST, which was introduced in FY17, voluntary payments as a proportion of the total amount detected had declined from 94.1% to 56.2%. For FY20, where data was only available for September 2019, there was a further decline to 54%.
However, the real concerns are the recovery rates and the pace of audits by the department. For instance, in the case of GST, only 1.6% of the planned Internal Audits were completed by the authorities. The recovery rate (as a percentage of total detection) was a lower 20%. While the authorities did a good job in recovering amounts from medium firms, the rate was 53%, In terms of large (14%) and small units (13%).
An internal audit by the department in central excise and service tax indicated an even poorer showing with only 12% recovery in FY20, down from 32% in FY19. In terms of large units, the department could only make a 6% recovery. The report also highlights the woeful performance in terms of disposal of show-cause notices. Not only was the percentage of disposal falling in the case of both central excise and service taxes, these are mostly legacy cases as most of the rates have been subsumed under GST, the amount under review by the department had increased by nearly 50% between FY17 and FY19 from ₹89,415 crore to ₹1.32 lakh crore.