Verify high-risk GST transitional credit claims fast, CAG tells tax board

The audit selected a pan-India sample of 8,514 cases for detailed audit based on data analysis of these 50,000 cases.

Verify high-risk GST transitional credit claims fast, CAG tells tax board
The CBIC identified 50,000 high-value transitional credit cases for verification by field formations.

The Comptroller and Auditor General (CAG) has asked the Central Board of Indirect Taxes and Customs (CBIC) to hasten the process of verifying high-risk transitional credits allowed under the goods and services tax (GST) regime from the previous indirect tax regime.

Transitional credit being a one-time flow of input tax credit from the legacy regime into the GST regime, was availed both by taxpayers migrating from the previous regime and new registrants under GST.

Over one million taxpayers had claimed and availed of the benefit of transitional credit of Rs 1.73 trillion under the GST Acts, of which 0.35 million, constituting 34% of the taxpayers, were under the jurisdiction of the CBIC. The claims of these taxpayers under central jurisdiction accounted for Rs 1.34 trillion, constituting 78% of the total transitional credit claimed and used under the GST Acts.

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“Audit recommends ensuring verification of the high risk claims reflected in Table 7aB of Tran 1 (credit on duty paid stock without invoices) and the cases where the transitional credit claim under Table 5a (closing credit balance of legacy returns) was in excess of the closing balance of legacy return,” CAG said in its report on GST tabled in Lok Sabha on Monday.

“(It recommends) initiating remedial measures for the compliance deviations pointed out during this audit before the claims become time barred.”

The CBIC identified 50,000 high-value transitional credit cases for verification by field formations. The audit selected a pan-India sample of 8,514 cases for detailed audit based on data analysis of these 50,000 cases. The sample size represented transitional credit of Rs 82,755 crore and constituted about 62% of the total transitional credit on the central side.

In spite of requisitions and follow-ups, the CBIC departmental formations did not produce records of 954 claims. As a result, 11% of the sample size, representing Rs 6,849.68 crore of transitional credit claimed, could not be audited.

In another 2,209 cases, representing Rs 19,660.72 crore of credit claimed, records were partially produced as relevant underlying records determining eligibility of credit were not produced.

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In February, the finance ministry provided an updated status of verification and said another 4,770 cases had since been verified and 4,079 cases were pending verification, and that irregular ITC detection had gone up to Rs 10,966 crore, of which Rs 3,596 crore had been recovered. The ministry also said the CBIC was actively monitoring the expeditious verification of transitional credit claims.

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