The Comptroller and Auditor General of
India (CAG) has delivered a significant blow to the perceived airtight
integrity of the technology-driven Goods and Services Tax (GST) system. In a
recent performance audit report, the CAG exposed serious systemic and
procedural deficiencies within the e-way bill common portal, warning
that these gaps are actively undermining tax compliance and exposing the
government to substantial revenue losses.
The e-way bill system, introduced in
April 2018 to ensure traceability and monitor the movement of goods valued over
₹50,000, was intended to be a cornerstone of GST's anti-evasion strategy.
However, the audit revealed that technical shortcomings and insufficient
integration have severely diluted its intended effectiveness.
🛑 Key
Technical and Compliance Failures Flagged by CAG
The performance audit highlighted
critical lapses resulting from inadequate coordination between the e-way bill
portal (managed by the National Informatics Centre or NIC) and the GST common
portal (managed by GSTN). These failures permitted practices that should have
been blocked by automated controls:
- Generation by Non-Filers and Cancelled
Registrations:
ü The audit
found that the e-way bill system allowed the generation of new e-way bills even
by taxpayers who were chronic non-filers of GST returns.
ü More
alarmingly, the system permitted e-way bills to be generated by taxpayers whose
GST registrations had already been cancelled. This failure to
cross-verify the active compliance status undermines the basic premise of the
system, creating a major compliance loophole.
- Duplicate Bills for Single Invoice:
ü A
significant control failure identified was the system’s lack of
cross-verification to prevent multiple e-way bills from being generated for
the exact same invoice number. This exposes the system to misuse,
potentially allowing the same consignment to be declared multiple times or
facilitating bogus billing rackets.
- Composition Dealers' Inter-State
Transactions:
ü The CAG
noted a clear procedural breach where taxpayers under the GST Composition
Scheme, who are legally restricted from engaging in inter-State outward
supplies, were able to generate e-way bills for both inter-State and
intra-State movements of goods. This suggests a failure to enforce
statutory limitations through the digital platform.
- Nil Filers Generating E-Way Bills for
Outward Supplies:
ü Perhaps
the most alarming finding was that taxpayers who had filed "Nil"
returns—indicating no outward supplies for a period—were nonetheless able
to generate e-way bills for outward supplies. This suggests a likely mechanism
for taxpayers to clandestinely transport goods and sell them without paying the
corresponding tax, indicating a clear leakage of tax revenue.
💡 CAG’s
Recommendations: The Path to System Integrity
In light of these findings, the CAG
has issued a set of critical recommendations aimed at bolstering the resilience
and integrity of the e-way bill system:
v Rectification
of System Deficiencies: The government must immediately direct the National
Informatics Centre (NIC) to fix all identified system flaws. The priority
is to strengthen automated checks to block fraudulent activities, particularly
preventing duplicate and illicit e-way bill generation.
v Stronger
Digital Integration: The core issue of inadequate coordination
must be resolved. The e-way bill common portal requires robust, real-time data
exchange with the GST common portal to instantly verify a taxpayer's compliance
status (filing of returns, status of registration, etc.) before allowing bill
generation.
v Clear
Verification Guidelines: Tax authorities must be equipped with clear,
prescribed verification guidelines to ensure effective on-ground checks.
v Penalization
Mechanisms: New mechanisms must be developed to proactively detect and
heavily penalize taxpayers involved in transporting goods without generating
mandatory e-way bills, which remains a key avenue for evasion.
🚀 The
Imperative for the Future of GST
The e-way bill system was designed to
be a key pillar in India’s shift to a technology-driven, transparent tax
ecosystem. The CAG's report serves as a timely and serious reminder that no
digital system is foolproof, and constant auditing, integration, and
fortification are necessary.
For the GST ecosystem to achieve its
full potential in streamlining commerce and preventing evasion, the central
government must prioritize addressing these systemic gaps. Bridging these
technological and procedural shortcomings is crucial not only to safeguard
government revenues but also to maintain the credibility of the entire GST
compliance framework.
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