TN's Commerical Tax Department caused loss of ₹297.77 crore: CAG

The Comptroller and Auditor General (CAG) has accused Tamil Nadu’s Commercial Taxes Department of causing loss to the state exchequer of more than ₹297.77 crore, by wrong calculation of value added tax (VAT) on liquor purchased from manufacturers from 2014-15 to 2018-19.

The CAG has also accused the Tamil Nadu State Marketing Corporation Limited (TASMAC) shops of collecting excess MRP on liquor bottles. The CAG criticised the TASMAC shops for not issuing bills for the liquor purchased.

The CAG report for 2018-19 was submitted in the Assembly on Monday, the last day of the Budget session.

“During scrutiny of VAT accounts between 2014-15 and 2018-19, the audit noticed that the manufacturers of liquor offered discounts, on the price approved by the Commissioner to TASMAC. As VAT has to be paid on the sale price, the manufacturers computed their turnover after deducting the discount amount,” said the CAG.

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TASMAC in turn, computed the tax based on the discounted turnover. “Due to this wrong procedure adopted by TASMAC, the deductible turnover computed by it was higher than the actual turnover on which tax was paid at the first point of sale. Consequently, there was a short payment of VAT by TASMAC to the tune of ₹424.02 crore,” said the CAG.

The Commercial Tax Department, after the audit report, showed revenue loss to the tune of ₹424.02 crore, assessment orders were passed and TASMAC paid ₹126.25 crore in March last year.

The CAG report further said that despite the audit report pointing out discrepancies in calculation of tax, the assessing authority of the Commercial Taxes Department had reduced the price of liquor for calculation of VAT. “The incorrect computation by the Commercial Tax Department resulted in short collection of VAT to the tune of ₹297.77 crore,” said the CAG.

The CAG has also pointed out that TASMAC did not pay the revised excise duty on closing stocks in 17 TASMAC depots and 38 TASMAC district offices, leading to a revenue loss of ₹13.99 crore.

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The Policy Note of 2019 of the Commercial Tax Department said that billing machines were issued to all TASMAC shops in 15 districts. “Audit physically verified by making purchases at two different outlets. No cash bills were issued and an amount in excess of maximum retail price (MRP) was being charged from customers. Neither the department nor TASMAC had conducted any periodical inspection to detect such issues,” said the CAG.

The CAG recommended strengthening the enforcement system to minimise such violations and time bound action must be taken on the errant licensees and employees, and hefty penalty be levied on continuing offenders.