Quickly check high-risk GST transitional credit claims, CAG tells tax council
The Comptroller and Auditor General (CAG) has requested the Central Board of Excise and Customs (CBIC) to expedite the process of auditing high-risk transitional credits permitted under the Goods and Services Tax regime ( GST) compared to the previous indirect tax system.
The transitional credit, being a one-time input tax credit flow from the old regime to the GST regime, was used by both taxpayers migrating from the previous regime and new GST registrants.
Over 1 million taxpayers had claimed and benefited from the Rs 1.73 trillion transitional credit under the GST laws, of which 0.35 million or 34% of taxpayers were under the jurisdiction of the CBIC. The claims of these central jurisdiction taxpayers amounted to Rs 1.34 trillion, or 78% of the total transitional credit claimed and utilized under the GST laws.
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“The audit recommends ensuring verification of high-risk claims reflected in Tran 1 Schedule 7aB (Duty-Paid Stock Credit without Invoices) and cases where the transitional credit claim under Schedule 5a (Balance Legacy Return Closing Creditor) exceeded the Legacy Return Closing Balance,” CAG said in its GST report filed to Lok Sabha on Monday.
“(He recommends) initiating corrective measures for the compliance deviations noted during this audit before the claims become statute-barred.”
CBIC has identified 50,000 high value transition credit cases for verification by field formations. The audit selected a pan-India sample of 8,514 cases for detailed audit based on the analysis of data from these 50,000 cases. The sample size represented a transitional credit of Rs 82,755 crore and constituted around 62% of the total transitional credit on the central side.
Despite the requisitions and reminders, the departmental formations of the CBIC did not produce the files 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 claimed credit, the records were partially produced as the relevant underlying records determining credit eligibility were not produced.
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In February, the Ministry of Finance provided an update on the status of verification and said that another 4,770 cases had since been verified and 4,079 cases were pending verification, and that irregular detection of ITC had reached Rs 10,966 crore, of which Rs 3,596 crore had been recovered. The department also said the CBIC is actively monitoring the prompt verification of transitional credit claims.