CAG reports tax shortfall in distilleries, breweries

The Comptroller and Auditor General (CAG) has uncovered significant tax shortfalls in its compliance audit of income tax collections from 11 distilleries and breweries in Uttar Pradesh, Maharashtra, Karnataka and Delhi. The findings, presented in Parliament last week, highlighted under-reported sales amounting to Rs 12,800 crore over a 10-year period ending December 2022.

The report detailed several instances of discrepancies. In one case involving a distillery in Uttar Pradesh, the CAG found Rs 1,378 crore in under-reported sales, which led to a tax shortfall of Rs 448 crore. The audit revealed that while the distillery declared sales of Rs 4,036 crore in its profit and loss account, data from the state excise department indicated sales of Rs 5,414 crore. These discrepancies were accepted by the income tax department for the assessment years, 2011-12 to 2013-14.

The CAG highlighted systemic lapses within the income tax department, including failure to utilise available information, lack of reconciliation of financial details from assesses, and insufficient verification of claims for rebates and discounts. These issues collectively contributed to the tax implications estimated at Rs 12,800 crore.

To address these shortcomings, CAG has recommended that the Central Board of Direct Taxes (CBDT) implement a standard operating procedure, mandating the requisition of financial transaction statements from state excise authorities during assessments. This measure aims to enhance accuracy and reliability of tax assessments in the sector.