The Comptroller and Auditor General (CAG) has recommended that the Finance Ministry periodically identify high-risk taxpayers within the GST composition scheme and cross-check their declared sales values with external sources to curb tax evasion.
An audit covering 8.66 lakh composition taxpayers under central jurisdiction for the 2019-20 to 2021-22 fiscal years revealed that many GST taxpayers are at risk of exceeding the turnover threshold for the composition levy scheme (CLS). The CAG identified these high-risk taxpayers using data from GST returns, including GSTR-4A and GSTR-7, as well as third-party sources like income tax returns and the 'Vahan' vehicle registration database.
The GST composition scheme is available to taxpayers with an aggregate turnover of up to ₹1.5 crore in the preceding financial year, or ₹75 lakh for those in special category states.
The CAG highlighted two major risks: under-declaration of the value of outward supplies to remain within the scheme, and non-compliance with eligibility conditions for the CLS. The audit found that some taxpayers were improperly continuing in the scheme despite not meeting the criteria and many were failing to file returns and make reverse charge payments.
"The Ministry should adopt a risk-based approach to periodically identify high-risk CLS taxpayers and verify their declared sales values from additional sources to minimise misuse," the CAG stated in a report recently tabled in Parliament. The CAG also suggested developing a system to identify and exclude ineligible taxpayers from the CLS to prevent abuse of the scheme.
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