CAG Flags Systemic Gaps in GST E-Way Bill Mechanism in Jammu Kashmir | Kashmir Life

SRINAGAR: A performance audit by the Comptroller and Auditor General of India has revealed serious gaps in the implementation of the Goods and Services Tax (GST) E-Way Bill (EWB) system in Jammu and Kashmir, highlighting risks to revenue and deficiencies in enforcement and compliance monitoring.

The report, tabled in the Jammu and Kashmir Legislative Assembly last week, examined the functioning of the EWB system between April 2018 and March 2022, a period during which the digital mechanism was expected to streamline goods movement and curb tax evasion following the rollout of GST.

An e-way bill is a mandatory document for the movement of goods, capturing consignment details prior to transit. Introduced to standardise and automate the process, it aims to curb tax evasion and strengthen GST collections. The system came into effect on April 1, 2018, for all inter-state movement of goods valued above Rs 50,000.

While the system saw extensive usage, with lakhs of e-way bills generated for movement of goods, predominantly by road, the audit found that the data generated through the system was not effectively leveraged by the State Taxes Department to ensure compliance. Instead, multiple instances emerged where the very mechanism designed to safeguard revenue was either bypassed or inadequately enforced.

The audit found that several taxpayers continued to generate e-way bills despite failing to file GST returns or declaring nil liability. In one instance, outward supplies running into tens of crores were reflected in e-way bill data, but the corresponding tax returns showed no liability, resulting in unpaid taxes exceeding Rs 2 crore. Similarly, taxpayers who had not filed returns at all were still able to generate e-way bills, with the department initiating little or delayed action to assess and recover dues.

Concerns were also raised over misuse of the Composition Levy Scheme. The audit observed cases where taxpayers registered under the scheme, who are barred from making inter-state supplies, nonetheless generated e-way bills for such transactions, pointing to the absence of system-level validation checks.

Besides, the report flagged cases of duplicate e-way bills being generated against the same invoices, involving transactions worth several crores. This raised the possibility of under-reporting of outward supplies, especially as some of these transactions were either partially reported or entirely omitted in GST returns. In another set of cases, taxpayers continued to generate e-way bills even after cancellation of their registration, with no immediate follow-up action by the department to determine and recover outstanding tax liabilities.

The audit also identified discrepancies between e-way bill data and tax returns, where significant tax liabilities reflected in the system were not fully discharged. In some instances, the lack of reconciliation between different GST returns made it difficult to pinpoint the exact invoices linked to unpaid taxes.

Beyond compliance issues, the audit pointed to systemic weaknesses in the EWB platform itself. Cases were detected where e-way bills were generated using invalid or suspicious vehicle numbers, including two-wheelers, scrapped vehicles, and those with cancelled registrations—indicating the absence of robust validation mechanisms despite integration with national vehicle databases.

A broader data analysis conducted by audit across thousands of taxpayers reinforced these concerns. It indicated widespread patterns such as e-way bills generated by non-filers, nil return filers, cancelled taxpayers and even unregistered persons, collectively involving transactions worth hundreds of crores. Despite this, the department’s recovery remained limited, with only a fraction of the identified demand realised.

On the enforcement side, the audit found that operational preparedness of the department remained constrained. Significant staff shortages were reported across enforcement wings, along with gaps in infrastructure such as patrol vehicles in certain regions. No specific targets were fixed for verification of e-way bills, and inspections were largely carried out on a random basis.

Procedural lapses were also noted during enforcement actions. In several cases, mandatory verification reports were not prepared, and taxpayers were not given an opportunity of being heard. A grievance redressal mechanism was also absent for much of the audit period, though it was later put in place.

The audit further observed that analytical tools and MIS reports generated by the system, intended to flag high-risk transactions, were not effectively utilised. This included monitoring of transactions involving unregistered persons, where large volumes of goods were moved without adequate scrutiny to determine tax liability or registration requirements.

In its conclusion, the audit stated that while the EWB system was envisaged as a critical tool to improve compliance and prevent tax evasion under GST, its potential remained underutilised in Jammu and Kashmir due to gaps in system design, data validation, and enforcement practices.

The Comptroller and Auditor General of India has recommended strengthening of validation controls within the system, better use of data analytics for compliance monitoring, and improved coordination and capacity within enforcement wings to ensure that the EWB mechanism effectively serves its intended purpose of safeguarding government revenue.