The Comptroller and Auditor General of India (CAG) has presented three important Audit Reports to Parliament relating to the functioning of the Department of Revenue (Indirect Taxes), covering Goods and Services Tax (GST), Customs, and the Duty Drawback Scheme for the period up to March 2023. These reports assess compliance, performance and systemic robustness, and make recommendations to strengthen revenue administration and trade facilitation.
GST Compliance Audit (Report No. 25 of 2025)
The Compliance Audit on Indirect Taxes – GST reviews the levy and collection of GST and selected legacy Central Excise issues.
Key highlights:
- Indirect tax collections increased by about 7 per cent in FY 2022–23 over the previous year, while Central GST revenue grew by 22 per cent.
- The Indirect taxes-to-GDP ratio declined, mainly due to a significant reduction in Central Excise revenue.
- The audit identified gaps in the compliance verification mechanism, particularly for taxpayers under the Composition Levy Scheme (CLS).
- Shortfalls were noticed in internal audit coverage, attributed largely to manpower shortages in Audit Commissionerates.
- In a subject-specific audit on GST payments and return filing, systemic risks were observed due to incomplete automation and reliance on self-assessed returns.
- Audit observations involving ₹22,165 crore were accepted or examined by the Department, with recoveries reported in several cases.
The CAG has recommended strengthening compliance verification, enhancing internal audit coverage, improving automation, and ensuring better use of MIS and data analytics for effective oversight.
Performance Audit on Duty Drawback Scheme (Report No. 33 of 2025)
The Performance Audit on the Duty Drawback Scheme evaluates whether the scheme effectively neutralises duties and taxes on exports and is administered efficiently.
Key highlights:
- The audit covered All Industry Rates (AIR), Brand/Special Brand Rates, Re-export of Imported Goods, and Deemed Exports.
- A total of 66 audit observations were made, with a revenue implication of ₹701.69 crore.
- Delays in revision of drawback rates, deficiencies in monitoring of export proceeds, and incomplete automation in the Customs EDI system were noted.
- Significant delays were observed in processing drawback claims, affecting trade facilitation and ease of doing business.
- Weaknesses were identified in internal controls, data integration between Customs, GSTN, DGFT and SEZ systems, and manpower availability.
The report makes 19 recommendations, including timely constitution of the Drawback Committee, strengthening IT systems and data integration, enforcing timelines, and expanding automation across all categories of drawback claims.
Customs Compliance Audit (Report No. 21 of 2025)
The Compliance Audit on Customs reviews customs revenue trends, implementation of export promotion schemes, and compliance with the Customs Act and related notifications.
Key highlights:
- Customs receipts increased to ₹2.13 lakh crore in FY 2022–23, registering a year-on-year growth of nearly 7 per cent.
- Imports and exports both recorded strong growth, with SEZs contributing significantly to exports and employment.
- Arrears of Customs revenue increased to ₹55,853 crore, with a large portion pending for more than five years.
- The audit reported 50 audit observations with a revenue implication of about ₹747 crore; recoveries were reported in a number of cases.
- A subject-specific compliance audit on MEIS and SEIS highlighted persistent systemic weaknesses, automation gaps, and irregular grant of incentives even after discontinuation of the schemes.
The CAG emphasized the need for stronger recovery mechanisms, full automation of workflows, improved validation controls, and effective follow-up on earlier audit recommendations.
Conclusion
Together, these three reports underscore the importance of robust compliance mechanisms, adequate staffing, end-to-end digital integration, and timely policy and procedural updates in indirect tax administration. The recommendations aim to enhance revenue assurance, improve governance, and further the objectives of trade facilitation and ease of doing business.
The All Reports can be accessed at: Report No. 21 of 2025 (Compliance Audit- Civil) , Report No. 33 of 2025 (Performance Audit-Civil) , Report No. 25 of 2025 (Compliance Audit)
