India’s Comptroller and Auditor General has identified over 1,300 cases of GST lapses in the works and construction sector, exposing a revenue shortfall of Rs 401.42 crore and highlighting widespread record-keeping gaps and systemic weaknesses.
India’s Comptroller and Auditor General has flagged 1,334 cases of GST non-compliance in the works contract and construction sector, with alleged revenue exposure of ₹401.42 crore, according to the audit report on revenue for the year ended March 2024 tabled in Parliament on Wednesday. The Central Board of Indirect Taxes and Customs accepted observations in 903 of those cases, involving ₹268.36 crore, and has recovered ₹15.88 crore so far.
The audit examined GST returns and related records from 850 taxpayers and 71 GST offices, mainly for 2020-21 and 2021-22, though some checks extended to 2023-24 to see whether the same lapses were continuing. The report pointed to a range of problems, including wrongly claimed concessional rates on road, bridge, railway and earthwork contracts, underpaid tax on government projects, short payment under the reverse charge mechanism, irregular input tax credit claims on ongoing and completed projects, incorrect service-code classification and failure to disclose additional places of business.
The CAG also said it ran into serious record-keeping gaps. In 431 cases linked to 392 taxpayers, detailed documents were not fully produced, even though the auditor found mismatches worth ₹2,732.56 crore in tax liability, input tax credit and concessional-rate claims. In 22 other cases, core return data was missing from departmental systems, indicating potential discrepancies of ₹36.09 crore. Oversight at GST offices also appeared weak: 57 of the 71 offices reviewed showed deficiencies, including late or incomplete scrutiny and poor follow-up on risk alerts issued by the audit and risk-management directorate.
The report also covered the third phase of the CAG’s audit of the GST Network’s information technology system. Of 56 unresolved issues from earlier audits, GSTN has addressed 38, partly fixed one and has three still under way, while the rest remain unresolved or only partly addressed. The audit said problems persist in registration checks, return-filing controls, integrated GST settlement and monitoring of taxpayers under the composition levy scheme. On the revenue side, indirect tax collections rose 8% year on year to ₹1.14 lakh crore in 2023-24, driven by a 13% increase in central GST to ₹1.08 lakh crore, but the overall indirect tax-to-GDP ratio slipped from 5.15% to 4.98% because central excise revenue continued to fall. The CAG recommended tighter scrutiny of subcontractors claiming exemptions, stronger system checks, better review of reverse-charge cases and closer coordination with the income tax department. Finance ministry and GSTN officials have accepted most of the IT-related findings, while revenue authorities have begun recovery action in accepted works-contract cases.
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