Compliance Performance
Tamil Nadu

Report No. 1 of 2013 - Performance and Compliance Audit on Revenue Sector of Government of Tamilnadu

Date on which Report Tabled:
Wed 15 May, 2013
Date of sending the report to Government:
Government Type:
Sector Taxes and Duties


The Report contains 21 paragraphs including two performance audits relating to non/short levy of taxes, interest, penalty, etc., involving RS 549.40 crore. The total receipts of the State during 2011-12 were RS 85,202.14 crore, comprising tax revenue of RS 59,517.66 crore and non tax revenue of RS 5,683.57 crore. RS 12,714.60 crore was received from the Government of India as State's share of divisible Union taxes and RS 7,286.31 crore as grants-in-aid. The revenue raised by the State Government in 2011-12 was 77 per cent of the total revenue receipts as compared to 75 per cent in 2010-11. Sales tax (RS 36,288.90 crore) formed a major portion (61 per cent) of the tax revenue of the State. Interest receipts, dividends and profits (RS 2,056.89 crore) accounted for 36 per cent of the non-tax revenue.

Test check of the records relating to commercial taxes, land revenue, motor vehicles tax, stamp duty and registration fees, electricity duty and mines and minerals during the year 2011-12 revealed underassessments, short levy, loss of revenue and other observations amounting to RS 852.86 crore in 2,330 cases. Performance Audit on "Implementation of Value Added Tax in Tamil Nadu" revealed the following: Registration certificates were issued to dealers without exercising basic/vital checks and without obtaining PAN which was mandatory. This encouraged the bill trading activities by the dealers which was evidenced from the fact that the Department itself had identified 1,037 dealers as 'bill traders' and cancelled the RCs retrospectively.

Absence of validation checks in the software rendered the information captured in the system unreliable. The TNVAT Act provides for selection of assessments for detailed scrutiny. There was delay both in selection of such cases and in completion of detailed scrutiny. The Commissioner of Commercial Taxes as Head of the Department had issued periodical instructions for scrutiny of returns and verification of the ITC claims made by the dealers. However, huge claims of incorrect/inadmissible/fictitious ITC were made by the dealers. The ITC and penalty recoverable amounted to RS 280.64 crore.

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