The Comptroller and Auditor General (CAG) has raised a red flag over a severe staffing crisis within the audit wings of India's central indirect tax authority. In a report tabled on Thursday, the national auditor highlighted that the Central Board of Indirect Taxes and Customs (CBIC) is grappling with a massive 38 percent vacancy in its audit formations as of July 1, 2024. This critical shortage is directly impacting the department's ability to conduct internal audits of taxpayers, a vital function under the self-assessment regime of the Goods and Services Tax (GST).
Staffing Vacancy Stifles Audit Reach
The CAG's performance audit on the Department of Revenue for the period ending March 2023 laid bare the operational challenges. The report stated that due to the significant manpower gap, there was only a marginal increase of 4 percent in the number of units selected for internal audit during the financial year 2022-23 compared to the previous year. "As of July 1, 2024, 38 per cent of positions in the Audit Formations of the CBIC were vacant," the report noted, emphasizing that this shortage is a primary constraint.
Improving Completion Rates, Yet Gaps Persist
Despite the staffing woes, the audit completion rates have shown a positive trend over the last three years. The percentage of units audited against those planned saw a steady climb: from 26 percent in FY'21 to 48 percent in FY'22, and further to 70 percent in FY'23. However, the CAG was quick to point out that a substantial gap remains between the ambitious audit plans and the actual number of units scrutinized on the ground. This gap underscores the system's strain and the potential for unchecked non-compliance.
Low Recovery and a Call for Action
The effectiveness of these audits, measured by the recovery of dues identified, presents a concerning picture. The recovery rate saw only a slight uptick to 18 percent in FY'23 from 17 percent in FY'22, but it still languished below the 21 percent rate recorded in FY'21. The CAG reminded the government that departmental action against non-compliant taxpayers is time-bound under the GST law. Any delay can compromise revenue collection. In its recommendation, the CAG urged the Ministry of Finance to take decisive steps. "In view of this, Ministry may take further action to increase the manpower in the CBIC audit formations to the optimum level," the report concluded, signaling an urgent need to bolster the tax administration's audit capabilities to safeguard GST revenues.
