A recent audit by the Comptroller and Auditor General (CAG) has revealed significant shortcomings in the Goods and Services Tax (GST) E-Way Bill (EWB) system’s implementation in Jammu and Kashmir. The report highlights a range of issues, from ineligible taxpayers exploiting loopholes to a severe lack of enforcement personnel, casting a shadow over the effectiveness of the tax monitoring mechanism.
The EWB system, designed to track goods valued above Rs 50,000 before movement, was introduced nationwide in April 2018 for inter-state transactions. Jammu and Kashmir adopted the system in phases for intra-state movement, maintaining the same threshold. The audit period scrutinized the system’s performance between 2018 and 2022, uncovering multiple instances of non-compliance and systemic failures.
One of the critical findings of the CAG report is the continued operation of ineligible taxpayers under the Composition Levy scheme. Furthermore, the audit revealed instances where taxpayers filed ‘nil’ returns or failed to file returns altogether, despite generating EWBs. These discrepancies resulted in a tax implication of Rs 2.29 crore. This raises questions about the robustness of the system’s checks and balances and the effectiveness of monitoring mechanisms in place.
Delving deeper into the data, the audit exposed a discrepancy between EWBs generated and the corresponding tax revenue reported. Specifically, three taxpayers within two assessment circles generated 5,739 EWBs, indicating a tax effect of Rs 67.99 crore. However, only Rs 64.24 crore was reported through GSTR-3B returns, leaving Rs 3.75 crore unaccounted for. The CAG attributed this disparity to the absence of proper reconciliation between GSTR-1 and GSTR-3B, making it difficult to pinpoint the specific invoices linked to the unpaid tax.
Beyond revenue discrepancies, the report also illuminated several compliance deviations. EWBs were generated by taxpayers whose registrations had been cancelled, and some bills contained invalid vehicle numbers, including those of scrapped vehicles, two-wheelers, and vehicles with cancelled or suspended registrations. The system also registered instances of multiple EWBs being generated against the same invoice. These irregularities indicate a lack of due diligence in the EWB generation process and potential vulnerabilities within the system.
A critical factor impacting the EWB system’s efficacy was the significant shortage of staff in the Enforcement Wing during the audit period (2018–22). Vacancy rates were alarmingly high across various positions, with State Tax Officers facing shortages ranging from 29 to 55 per cent. Inspectors experienced vacancy rates between 43 and 72 per cent, while Sub-Inspectors saw shortages of 54 to 71 per cent. The lower rungs of the enforcement hierarchy were similarly affected, with Head Guards facing vacancies of 36 to 92 per cent, Guards at 77 to 86 per cent, and drivers at 71 to 83 per cent. Such a depleted workforce inevitably hindered enforcement efficiency, potentially contributing to the observed compliance lapses.
The CAG report further highlighted the absence of specific targets for EWB verification during the audit period. This lack of targeted oversight likely contributed to a lax enforcement environment. Physical verification reports in Form MOV-04 were not prepared in 47 cases, impeding the ability to confirm the correctness of goods assessment. The report also noted the failure to appoint a Grievance Redressal Officer to address complaints filed through Form GST EWB-04, potentially leaving taxpayers without recourse for resolving disputes.
Additional inconsistencies included the non-levy of late fees on delayed returns, the failure to charge interest on late tax payments, delays in the cancellation of registrations, and the non-filing of GSTR-10 returns. Cases where action was initiated but not completed were also observed, indicating inefficiencies in the enforcement process.
The audit casts light on wider compliance issues such as short or non-payment of interest, undischarged tax liabilities, irregular Input Tax Credit (ITC) claims, mismatches between returns, and availing ITC without supplier tax remittance. These deviations resulted in a very high tax implication of Rs 439.36 crore, underscoring the magnitude of the problem. Input Tax Credit (ITC) is a crucial component of the GST mechanism, allowing businesses to claim credit for the GST they’ve paid on purchases which are then used in the manufacturing or supply of goods or services. Irregularities in ITC claims can significantly impact government revenue and create distortions in the tax system.
The Goods and Services Tax (GST) was introduced in India on July 1, 2017, marking a major reform of the country’s indirect tax system. It replaced a complex web of central and state taxes, aiming to create a unified national market. The E Way Bill (EWB) system, introduced under GST, is a document that allows the movement of goods worth more than Rs 50,000. It is generated electronically on the GST portal before the goods are transported. The EWB includes details such as the consignor, consignee, destination, and the goods being transported. It is a crucial tool for tracking the movement of goods and preventing tax evasion.
The CAG report’s findings raise questions about the overall effectiveness of the GST system in Jammu and Kashmir and the need for stricter enforcement and compliance measures. While the GST aims to streamline taxation and reduce economic distortions, its success depends on effective implementation and monitoring. The revealed lapses indicate that there may be a need for systemic improvements, including strengthening enforcement capabilities, enhancing data reconciliation processes, and addressing administrative loopholes.
Authorities in Jammu and Kashmir have yet to issue a detailed response to the CAG report and outline specific steps to address the identified shortcomings. However, we anticipate that the findings will prompt a re-evaluation of the EWB system’s implementation and the adoption of measures to ensure greater compliance and revenue collection.
Tahir Rihat (also known as Tahir Bilal) is an independent journalist, activist, and digital media professional from the Chenab Valley of Jammu and Kashmir, India. He is best known for his work as the Online Editor at The Chenab Times.
