Public Accounts Committee flags mismatches in GST worth Rs 16.6K cr in FY21

The Public Accounts Committee (PAC) has flagged massive discrepancies in Input Tax Credit (ITC) reporting, with mismatches between monthly (GSTR-3B) and annual (GSTR-9) Goods and Services Tax (GST) returns.

 

The committee’s 19th report on the Central Board of Indirect Taxes & Customs’ (CBIC’s) compliance audit reveals that over 33,381 GST returns between 2017 and 2021 had inconsistencies, with a ₹16,622 crore gap in ITC claims in FY21 alone.

 

The PAC said the inconsistencies highlight serious inefficiencies in the GST system’s data validation and reconciliation processes as GSTR-9 is auto-populated from GSTR-3B.

 

The Committee strongly criticised the government, saying that “considering that similar discrepancies were highlighted in the CAG’s Audit Report No 5 of 2022, it is disheartening that even after a considerable period of more than seven years, the Ministry has not been able to stabilize a robust GST ecosystem.”

 

It also flagged “a lack of adequate post-facto data analytics in cases of mismatch between important data points.”

 

The Finance Ministry, in response, said that it has redesigned the auto-population process for GSTR-9 to improve accuracy.

 

The Ministry also clarified that “ITC accounting or liability accounting is done as a continuous ledger, meaning any monthly return can include ITC from the past financial year”. It further stated that “once invoice-level accounting of ITC is built through the Invoice Management System (IMS), this issue is expected to be addressed.”

 

Calling for urgent intervention, the PAC asked the Finance Ministry to ensure strict compliance with timelines for fixing GST return mismatches. It also sought a detailed report on corrective actions, especially on auto-populated and non-editable fields in GSTR-9. 

 

“The Committee emphasises that the Ministry should address the persistent data discrepancies in auto-populated and non-editable fields of annual returns (GSTR-9),” the report stated. It also directed the government to ensure that GST filing improvements are implemented within strict compliance with established timelines.

 

Abhishek Jain, Indirect Tax Head & Partner, KPMG says, “Earlier, Table 8A of GSTR-9 was based on GSTR-2A, which often led to reconciliation challenges due to its dynamic nature. With the transition to a static statement in GSTR-2B, these issues are expected to reduce. However, even in the current year, mismatches persist, largely due to credit adjustments spanning overlapping periods. This has significantly contributed to increased litigation at the ground level, with a rise in notices over routine discrepancies. With the government’s commitment to streamline these processes, the industry is hopeful for a substantial reduction in such issues, paving the way for enhanced ease of doing business.”

 

On return scrutiny, the PAC found that the Automated Returns Scrutiny Module -- a system meant to detect discrepancies and auto-generate notices -- is still under development, despite being a crucial compliance tool. The Committee emphasised the need for “full transparency and monitoring of the scrutiny function” and urged the Ministry to expedite its implementation to prevent time-barred tax demands.

 

The PAC has called for a revamped GST 2.0 after stakeholder consultations to address taxpayer concerns and ensure a simplified and rationalised indirect tax system.

 

The Committee stressed that while auto-populated forms and tutorial videos have been introduced, these “may not be sufficient to address the underlying complexities” in compliance. It urged the Ministry to “streamline the return filing process by consolidating forms and reducing the frequency of filings where possible” and to adopt a “tiered compliance approach” to ease the burden on smaller businesses.