The Comptroller and Auditor General (CAG) in its first report on the implementation of Goods and Services Tax (GST) has noted that the failures in proper implementation of the GST resulted in slowing down of growth of indirect taxes to 5.80 per cent in 2017-18 as compared to 21.33 per cent during 2016-17. The Government of India’s revenue from goods and services also took a 10 per cent dip.

The report criticized Revenue Department under the Finance Ministry and Central Board of Indirect Taxes (CBIC) for imposing non-user friendly tax filing system.

The CAG said that one significant area where the full potential of GST roll out has not been achieved is the roll out of the simplified tax compliance regime.


According to the report, the filing percentage of GSTR-1 returns (monthly returns on outward supplies) were throughout less in comparison to the corresponding filing of GSTR-3B returns (summary self-assessed return). The introduction of GSTR-3B has resulted in filing of returns with input tax credit claims which could not be verified. Since filing of GSTR-1 is mandatory, short-filing is an area of concern and needs to be addressed.

During the audit, the CAG found that system validations were not aligned to the provisions of the GST Act and as a result, there were some crucial gaps in the registration module. Among various gaps, the system failed to validate and debar ineligible taxpayers from availing Composition Levy Scheme.

The auditor also found that IGST settlement reports—designed to enable sharing of IGST between central government and states and generated based on the algorithm that runs on GST IT system—were not being generated.


The CAG Report pointed out that Revenue Department, CBIC and GSTN failed to check the mechanism of GST collection properly before rolling out in July 2017. The apex auditor observed that these problems occurred in the administration of GST was due to inadequate co-ordination among these three main stakeholders. The auditor has pulled GSTN for not taking due care in development and in testing of the system before its rollout.

This is the first audit report of CAG on GST based on review of the system for the Financial Year 2018-19.