Demonetization – profit or loss? Let CAG deconstruct it

The Comptroller and Auditor General of India (CAG) plans to audit the impact of note ban and the affect it has had on government tax revenues, said CAG Shashi Kant Sharma, according to PTI.

In an interview to PTI, he said the auditor is gearing up to audit tax revenues under the new Goods and Services Tax (GST) regime and has started capacity building and reorienting its audit methodology and procedures.

Among the special audits, CAG has already completed audit of agricultural crop insurance scheme and flood control and flood forecasting and is now engaged in several important audits like Right to Education, National Rural Health Mission, defence pensions and Ganga Rejuvenation, he said. "These reports should be ready by the end of the current year."

Sharma asserted that CAG has audit jurisdiction over any body or authority which has any relation to government revenues and expenditure and resistance by some like city development bodies, DISCOMs and metro corporations will wither away.

"We plan to audit certain issues related to fiscal impact of demonetisation, largely its impact on tax revenues," he said.

The government had withdrawn old 500 and 1,000 rupee notes from circulation on November 8 last year, and announced a new tax amnesty scheme for those holding unaccounted junked currency.

CAG audit may look into expenditure on printing of notes, RBI dividend payout and banking transaction data.

The auditor has also conveyed to the government its stand on the recent move of the GST Council to delete section 65 of the preliminary draft that authorised CAG to audit GST.

"Our mandate covers GST just like the earlier taxation regimes were covered. We have already started work on restructuring of our revenue audit arrangements to methis likely challenge when GST is introduced.

"This exercise would include issues of capacity building, data access and analysis, reorientation of audit methodology and procedures and developing end-to-end IT solutions," he said.

Sharma said executive, legislature, judiciary and audit have clearly demarcated roles and responsibilities.

"The framers of our Constitution were fully aware of the concept of checks and balances and hence you find the mention of Judiciary and CAG in the fifth part of the Constitution along with legislature and executive," he said. "The CAG's DPC Act of 1971 provides the details of the mandate and scope of audit available to us."

Stating that there are no lacunae in CAG's empowerment but with advent of time, the governance models have undergone changes.

The September 2014 judgement of the Supreme Court in the telecom case "reinforced an important principle that wherever public resources are being used by private companies for revenue generation, CAG will have a duty to examine as to whether the government is getting due share of such revenue," he said.

"So, I can say that the bodies and authorities which have any relation to government revenues and expenditure are under the audit jurisdiction of CAG," he said.

City development bodies, electricity distribution companies and metro corporations "resist" CAG audit on the ground of being autonomous or on the ground of getting no support of the government although they perform the functions which were earlier being performed by the government departments, he said.

"I believe the situation will settle down with passage of time and such resistance will wither away," he added.