The State Tax Department (State GST), which plays a major role in the state’s revenue, is being negligent in issuing refunds to businessmen. Due to this, the businessmen related to this are getting undue benefits, while the government is getting hurt.
The CAG probe has found that state tax authorities issued incorrect refunds amounting to Rs 21.32 crore in various cases. This irregularity was found between July 2017 to September 2021 in cases with zero rated supply and inverse duty structure.
200 cases examined:
According to the CAG report, 200 cases related to zero rated supplies and others were investigated. The cases of zero rated supply are related to the exporter, who is covered under zero tax liability. Exporters get a refund of the tax paid on the local purchase of the goods they supply.
For this, the amount related to the claim should be entered in their EACL (Electronic Credit Ledger). However, the officials of the State Tax Department made undue refunds of Rs 5.72 crore to the claimants even after the balance in EACL was zero.
On the other hand, in case of inverse duty structure, the material used to make the goods is taxed separately, while the manufactured goods are taxed separately. In this way, sometimes the tax on the material used becomes more than the tax on the finished goods. Hence, the balance in the credit ledger increases.
In such cases, the refund is given on the goods component excluding the service component in the material used in the manufacture of the goods. Even after the clear rule, the authorities issued refunds in goods component along with service. Due to which the department lost Rs 15.6 crore.
Question on the scrutiny system of the department:
The CAG found that out of 200 sample cases taken up for scrutiny, the department had scrutinized the returns of only 15 businessmen. However, after the CAG probe, the department probed 20 more cases. Nevertheless, dissatisfaction was expressed at this speed of scrutiny.
Inaction in levying tax and penalty also:
CAG investigation has found that all the officers of the State Tax Department have remained inactive even in levying tax and penalty. Thus, the department suffered a loss of Rs 6.29 crore by way of tax, penalty and interest.
All such cases date back to the time of VAT Act and the authorities covered them up with the implementation of GST. According to the CAG report, unauthorized declaration in Form-11, sale of products not included in valid certificates resulted in a loss of Rs 3.52 crore.
