CAG Flags Huge Odisha GST Gap: Only ₹110 Crore Recovered From ₹2,500 Crore

30 Sep 2026, 05:40 by Vinay Kakkad · KalingaTV

Bhubaneswar: A state audit by the Comptroller and Auditor General (CAG) of India has revealed that Odisha’s tax department is struggling to collect unpaid Goods and Services Tax (GST), recovering barely 4% of the tax penalties and demands raised in recent years.

Between financial years 2020–21 and 2022–23, state tax officials reviewed 177,000 tax returns and detected unpaid taxes and penalties worth over ₹2,500 crore. However, the department managed to recover only around ₹110 crore from those demands, leaving the remaining vast sum uncollected.

The gap was even wider in eight tax circles selected for a detailed check, including Bhubaneswar-I, Balasore, and Rourkela-I. In these offices, authorities issued formal demand notices to collect ₹1,078.06 crore, but brought in only ₹19.94 crore—failing to recover more than 98% of the assessed dues.

The audit highlighted that the problem goes beyond slow collections, pointing to missing paperwork, unmonitored business closures, and weak highway checkpoints.

1. Tax Mismatches and Missing Documents

The CAG used data analysis across the state to scan GST filings and found 301 cases of major discrepancies involving ₹10,267 crore:

In 88 cases, the department took corrective action: it recovered ₹100.86 crore from 13 businesses, raised fresh demands of ₹35.76 crore against 13 others, and issued legal show-cause notices for ₹853.65 crore across 53 cases.
The department had already started action in 92 cases worth ₹2,088 crore before the audit began, while 40 cases involving ₹621.26 crore were still under review.
When auditors checked a sample of 79 specific businesses, they found 52 taxpayers had claimed ₹1,228.31 crore in excess tax credits, and 46 taxpayers had skipped paying ₹530.65 crore in liabilities.

The auditors could not verify an additional ₹2,528.12 crore in suspicious mismatches because 12 out of 24 tax circle offices failed to provide basic business records—such as bills, profit-and-loss statements, and ledgers—for 43 of the 79 selected companies.

2. Canceled Registrations Left Unchecked

Under GST rules, when a business cancels its registration or shuts down, it must file a final exit return (Form GSTR-10) within three months. This ensures it clears all remaining dues and returns any unused tax discounts on remaining stock.

In nine tax circles during 2020–21, authorities canceled 4,730 business registrations.
Only 809 of those business owners (about 17%) filed the required final return.
Despite having the legal power to assess and demand taxes from defaulters, the department took follow-up action in only 53 cases, leaving 3,921 shut-down businesses completely unchecked.

3. Loophole Abuse in Highway Transport (E-Way Bills)

Every commercial shipment valued over ₹50,000 requires an electronic transit pass, known as an e-way bill. The audit found that traders routinely bypassed the system to move goods without paying taxes:

Non-Filers Moving Cargo: Six businesses generated 2,340 e-way bills to ship goods worth ₹79.81 crore, dodging ₹11.90 crore in taxes, without ever filing their monthly tax returns.
Shipping After Cancellation: Four firms generated 43 transit bills to move goods worth ₹1.93 crore after their business licenses had already been canceled. The tax department never assessed the ₹35 lakh in unpaid tax on these trips.
Reusable Invoices & Zero Turnover: Four businesses used duplicate invoices to generate multiple transit passes for goods worth ₹1.86 crore (avoiding ₹10 lakh in taxes). Another four dealers moved ₹5.59 crore worth of goods on 96 passes but declared zero sales in their filings without facing any action.
Suspicious Vehicles: Fourteen taxpayers moved goods worth ₹80.30 crore (carrying ₹13.78 crore in tax liabilities) on 1,113 transit passes that listed 235 suspicious vehicles, including stolen trucks, canceled license plates, and two-wheelers.

4. Delays and Manpower Shortages on the Ground

Even when enforcement teams caught vehicles violating rules on the road, follow-through was slow:

Delayed Deposits: Under state treasury rules, cash collected from intercepted vehicles must be deposited within three days. In practice, officers delayed depositing the money into government accounts by anywhere from 6 to 1,257 days. In one case in Bolangir, a penalty of ₹2.26 lakh sat unrecorded for 887 days, allowing the business to use the credit for other liabilities until the audit flagged it.
Lower Fines Applied: In 23 vehicle seizure cases where cargo owners could not prove ownership, officers charged them under a softer penalty rule instead of the stricter provision, causing a loss of ₹1.55 crore in government revenue.
No Digital Scanners: The 162-kilometer Biju Expressway between Sambalpur and Rourkela had no automatic electronic scanners at toll gates, forcing the department to rely on roadside patrols that faced staff vacancy rates ranging between 13% and 57%.