The Comptroller and Auditor General (CAG) has detected 1,334 cases of goods and services tax (GST) non-compliance in the works contract and construction sector involving Rs 401.42 crore. The Central Board of Indirect Taxes and Customs (CBIC) has accepted observations in 903 of these cases, worth Rs 268.36 crore, and recovered Rs 15.88 crore so far. The CAG, in its report on the Department of Revenue for the period ended March 2024, which was tabled in Parliament on August 12, 2026, highlighted these findings.
CAG auditors checked the GST returns and related records of 850 taxpayers and 71 GST department offices. The main period covered in this examination was 2020-21 and 2021-22.
However, in some of these departments, the auditors also examined later years — up to 2023-24 — to determine whether the same problems continued.
The main problems included incorrect claims of concessional rates or exemptions on contracts for roads, bridges, railways and earthwork; short payment of tax on works done for government bodies; short payment under the reverse-charge mechanism by builders and developers; irregular input tax credit claims on ongoing and completed projects; failure to declare the correct service codes and additional places of business; and mismatches between input tax credit (ITC) claimed and tax paid, along with a short levy of interest. In 123 cases alone, these issues had a revenue impact of Rs 190.98 crore, while another set of 1,057 deficiencies involving 522 taxpayers added Rs 188.98 crore.
The audit also faced difficulties in obtaining complete records. In 431 cases involving 392 taxpayers, detailed documents were not fully produced, and these showed mismatches of Rs 2,732.56 crore in tax liability, ITC and concessional rates. In 22 more cases, basic returns and statements were missing from the department’s system, pointing to a potential mismatch of Rs 36.09 crore. Oversight by GST department offices was weak. Of the 71 offices checked, 57 showed deficiencies. Scrutiny was either not conducted properly or delayed in several places, and follow-up action on risk alerts from the Directorate General of Audit and Risk Management was incomplete in many cases.
