The Comptroller and Auditor General's (CAG) audit of the GST regime for the year ended March 2021 flags problems. These include the way refunds are dealt with and failure to detect frauds. Systemic weaknesses such as deficiencies in the automated refund module, sanction of suspicious refunds to taxpayers without proper scrutiny, absence of a way to monitor the realisation of export proceeds, and double payment of GST refunds are being tackled. The remedy lies in the correction of business rules, proper implementation of systems and technology, and robust deployment of data analytics that will also minimise any arbitrariness by tax authorities. Frequent changes in the rate structure, though, can unsettle the GST system.

Central GST taxes as a percentage of GDP fell to 2.79% in FY2021 from 2.95% in FY2020 and 3.02% in FY2019. Collections have picked up this fiscal, as glitches are being fixed. Many of CAG's recommendations have already been acted upon, such as comprehensive profiling of the taxpayers by integrating data from both internal and external systems such as income-tax (I-T), Directorate General of Foreign Trade (DGFT) and corporate affairs ministry, as well as scrutiny involving the risk-based selection of returns (just as in I-T). A real-time system of red-flagging high-risk taxpayers in the refund-related modules to avoid fake input tax credit claims, and a proper module for post-audit refunds to improve monitoring, are also in order.

CAG has also pointed to inconsistencies in the GST Network (GSTN) data, such as gaps between taxable value and declared tax liability. An effective review and follow-up system by GSTN to address the causes of data inconsistencies is a must. Revenues would go up significantly with a robust GSTN.

Source: The Economic Times 
https://economictimes.indiatimes.com/opinion/et-editorial/cag-plans-to-fix-gst-holes-and-loopholes/articleshow/93486478.cms