CAG’s IT Audit of GSTN – Observations regarding Refund and E-Way Bill Modules

by | May 18, 2021 | Insight

Recently, Comptroller and Auditor General of India (‘CAG’) published its report on Information Technology (‘IT’) audit of Goods and Services Tax Network (‘GSTN’) for Financial Year (‘FY’) 2018-19 and 2019-20. Key observations on Refund and E-Way Bill Modules are discussed as under:

  1. Refund Module 

S. No.


Legal provision

CAG observation

GSTN reply

NITYA Comments


Excess claim of refund due to inadequate control / validation

As per Section 54(3) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) read with Rule 89(5) of the Central Goods and Services Tax Rules, 2017 (‘CGST Rules’), a taxpayer filing refund application for unutilized Input Tax Credit (‘ITC’) on account of Inverted Duty Structure is required to file application in RFD-01 along with Statement-1A incorporating details of all inward and outward supplies.

There is no validation on portal to verify that inverted rated turnover reflected in RFD-01 is less than or equal to total turnover reflected in Statement-1A. Due to this, taxpayers are getting excess refund.


CAG suggested to introduce this said validation check.

GSTN agreed for incorporation of such validation check.

Taxpayers should suo-moto validate this before filing refund application. If taxpayers claim excess refund, proceedings under Section 73 or Section 74 of the CGST Act for recovering excess refund can be initiated.


Failure to re-credit Electronic Credit Ledger (‘ECL’) on issuance of deficiency memo


Rule 93(1) of the CGST Rules provides that ITC debited on filing refund application shall be re-credited in ECL on issuance of deficiency memo.

In some cases, ITC is not re-credited when proper officer issues deficiency memo second or subsequent time which results in blockage of ITC for taxpayers.

GSTN acknowledged this error and stated that this was due to internal code error. GSTN stated that it has corrected this error now.

Taxpayers should attempt filing correct and complete refund application in one go to avoid deficiency memos.


Insertion of column for reflecting ITC availed on capital goods

Rule 89 of the CGST Rules allows refund of ITC on inputs and input services relatable to export of goods or services. A taxpayer needs to manually deduct ITC availed on capital goods from total ITC availed for computing refund amount.

There is no functionality on portal to exclude ITC availed on capital goods from total ITC availed.


CAG suggested that an additional field may be given in refund application to mention amount of ITC availed on capital goods.


GSTN stated that it will submit this proposal before Government for appropriate action.


Non- implementation of ‘with-hold’ request functionality

Rule 96(4)(a) of the CGST Rules provides that refund of IGST paid on export goods may be withheld on request of Commissioner of Central Tax.

The functionality of withholding refund of IGST paid on export goods has not yet been implemented on portal.

GSTN agreed with the same and stated that it has placed this issue before the Law Committee.

GSTN ought to have introduced this feature instead of referring it before Law Committee.


  1. E-Way Bill Module 

S. No.


Legal provision

CAG observation

GSTN / NIC reply


Rejection of E-Way Bill (‘EWB’)

Rule 138(12) of the CGST Rules provides that if recipient does not accept / reject EWB within 72 hours then it shall be deemed that recipient has accepted EWB.


In some cases, recipient rejected EWB even after 72 hours. As per CAG, option of rejection should not be available after expiry of validity of EWB.

NIC replied that this issue has been resolved now.


Auto-calculation of distance basis PIN codes

EWB system auto-calculates motorable distance between location of supplier and recipient basis PIN codes. However, user can alter distance subject to limit of 10 percent.


In some cases, the restriction of 10 percent was not applied by portal and users entered higher distance. This may result in using same EWB for multiple trips.

GSTN replied that PIN master is updated once in few months and this error can happen only in case of new PIN codes.

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