CHENNAI: Gaps in internal audit capacity and persistent staff shortage have weakened oversight in Tamil Nadu’s Goods and Services Tax (GST) administration, leaving audit objections involving Rs 782.52 crore unresolved, the Comptroller and Auditor General of India (CAG) has said in a report tabled in the state Assembly on Friday.
The report flagged the absence of a dedicated internal audit wing for GST. Since June 2019, audit functions have been handled by the Review, Appeal and Legacy Section, an arrangement the CAG said was inadequate given the scale and complexity of GST administration. The department attributed the mounting backlog to shortages of assistant commissioners and support staff.
In 2022–23, 269 of 272 eligible offices were scheduled for internal audit, but only 125 were covered, less than half the planned workload, despite the deployment of 45 audit parties. Vacancies in supervisory and support posts significantly curtailed audit coverage and follow-up, the report noted.
Several audit objections have remained pending for over a decade, some dating back to periods prior to 2012–13. The CAG cautioned that statutory time limits for reopening assessments and issuing demand notices could render recoveries legally untenable if delays persist. It called for urgent, time-bound measures to clear long-pending objections and strengthen internal controls.
Beyond internal audit weaknesses, the report examined GST compliance through thematic audits on taxpayer registration and departmental monitoring of return filing and tax payments. GST registration, introduced in July 2017, required migration of existing VAT, excise and service tax assessees, followed by fresh registrations after verification. Registration is PAN-based and state-specific, with taxpayers opting for either the regular or composition scheme based on turnover thresholds.
Covering the period from July 2017 to March 2022, the audit assessed compliance in registration, amendment, cancellation and revocation processes. The exercise involved analysis of pan-state GST data and cross-verification with third-party information from the registrar of companies, police authorities and registration departments.
The audit period also coincided with Tamil Nadu’s transition from a Model I GST back-end architecture, managed under the Total Solutions Project developed by Tata Consultancy Services, to a Model II system from September 2022.
Strengthening internal audit capacity and tightening registration oversight will be critical to safeguarding revenues and restoring confidence in compliance mechanisms, the report said.
The observations assume significance in the backdrop of the state’s 2026–27 interim Budget, which reported a shortfall of Rs 14,355 crore in the 2025–26 State’s Own Tax Revenue target, with GST accounting for the largest share.