Flaws, lapses cost key revenue-generating departments crores in tax revenue in Karnataka: CAG report

“Test-check of 34 cases under Detailed Audit, cases audited by the Department under Section 65, and five Local GST Offices audited under Commercial Taxes Department, 44 unit offices under Department of Stamps and Registration, and eight unit offices under State Excise Department conducted during the year 2023-24, showed under-assessment/short levy/loss of revenue aggregating to Rs 253.73 crore. Under the Transport Department, an audit of 30 offices found under-assessment of tax and other irregularities amounting to Rs 16.49 crore,” it said.

In the GST audit, CAG identified an additional revenue of Rs 112.16 crore in the 90 cases audited for the 2020-21 tax period. “…but recoveries amounted only to Rs 9.18 crore, reflecting a recovery rate less than 10 per cent,” the report said. The non-adoption of Open Market Value for construction service in the Joint Development Agreement (JDA) led to undervaluation of Rs 118.06 crore and short levy of tax amounting to Rs 21.26 crore, the report further said.

Another flaw highlighted was the non-compliance of the government notification rates after the revision of tax rates for government authorities. “Nine contractors of Karnataka Residential Educational Institutions Society continued to pay tax at older rates, resulting in short payment of tax of Rs 6.38 crore,” the report said.

In the Stamps and Registration Department, CAG observed cases of misclassification, undervaluation, and suppression of facts across multiple instruments, leading to significant short collection of tax. “Misclassification of the Power of Attorney and Agreements of Sale led to short levy of Stamp Duty and Registration Fee amounting to Rs 15.06 crore and Rs 18.84 crore, respectively,” it said.

Apart from this, improper execution or classification of release deeds resulted in a short levy of Rs 14.20 crore, while Mortgage Deeds were incorrectly classified, causing a short levy of Rs 6.69 crore.

Undervaluation of the undivided share resulted in short collection of Rs 9 crore. Adoption of incorrect rates and non-consideration of enhanced value for properties in 99 Joint Development Agreements resulted in a short levy of Rs 32.82 crore. “Suppression of facts regarding land status, Power of Attorney, and Market Value led to a short levy of Rs 14.10 crore. Further, undervaluation of the properties due to non-adherence to special instructions and guidance value rates resulted in a short levy of Rs 4.05 crore,” the report noted.

Transport department audit

Audit of the transport department showed that though fitness certificates of 3.87 lakh vehicles had expired between April 2019 and March 2024, they continued to ply on the road. This signified that “RTOS failed to ensure that only roadworthy vehicles remain in usage. Similarly, it was observed that about one third (4.7 lakh out of 14.01 lakh) vehicles requiring transport permits did not have valid permits,” the report said.

It also noted that enforcement activities between 2019 and 2024 covered about 22.2 lakh vehicles annually and collected Rs 363.46 crore in fines. But, the enforcement “was not data-driven or strategically targeted and lacked systematic follow-up, due to which vehicles with expired fitness certificates, unpaid taxes, or missing permits continued to operate with minimal checks,” the CAG report added.