In a State where taxes constitute one of the principal sources of Government revenue for funding public infrastructure, healthcare, education, welfare schemes, salaries, pensions, and other developmental activities, the Rural Engineering Department (RED), Government of Manipur, has been found by Audit to have failed to deposit Rs. 2.15 crore in Value Added Tax (VAT) deducted from contractors’ bills into the State Government Account.
The lapse has been highlighted in the Audit Report on General, Social, Economic and Revenue Sectors for the year ended 31 March 2023 (Government of Manipur), which recorded that the Project Implementation Units (PIUs) under the Manipur State Rural Road Development Agency (MSRRDA), functioning under the Rural Engineering Department, deducted VAT at the rate of 5.6 per cent, amounting to Rs. 2.15 Crore from 95 bills relating to 34 ongoing rural road works, involving a total bill amount of Rs. 38.53 crore. Instead of remitting the deducted Government revenue into the State Government Account, the amount was retained in the bank account of the Empowered Officer, MSRRDA.
The Audit specifically observed that the deducted VAT had not been deposited into the State Government Account up to the date of audit. It further noted that the concerned PIUs failed to furnish any reasons for the non-deposition of the Government revenue. The Audit also observed that no explanation was furnished as to why the deducted Government revenue was retained in the bank account of the Empowered Officer, MSRRDA, instead of being remitted to the State Government Account.
The audit finding assumes greater significance in view of the fact that, during the initial inspection of the accounts and records of the Executive Engineers of PIU-I, PIU-II and PIU-III, RED/MSRRDA, for the period from 1 April 2017 to 31 March 2020, the Office of the Principal Accountant General (Audit) had observed that VAT amounting to Rs. 6,43,14,668, deducted at the rate of 5.6 per cent from bills relating to several ongoing works, had been retained in the bank account of the Empowered Officer, MSRRDA. However, the final Audit Report for the year ended 31 March 2023 ultimately recorded non-deposit of Rs. 2.15 crore relating to 95 bills covering 34 ongoing works. The difference between the figures reflected in the inspection findings and the final Audit Report raises questions regarding the accounting treatment of the balance amount and whether it was subsequently deposited into the State Government Account or otherwise regularised.
Documents available with Imphal Times show that VAT at the rate of 5.6 per cent was deducted from contractors’ bills at the time of payment. The deduction is reflected in departmental bills, vouchers, and payment records, indicating that the VAT amount was collected by the Department before releasing payments to contractors.
As the deducted VAT constitutes Government revenue, it is ordinarily required to be remitted into the State Government Account in accordance with the applicable financial rules. However, the Audit found that the deducted amount remained in the bank account of the Empowered Officer, MSRRDA, instead of being credited to the State Government treasury. The Audit Report also recorded that no reasons for such non-deposition were furnished by the concerned PIUs.
The issue assumes added significance because taxes constitute one of the principal sources of the State Government’s own revenue. Every rupee collected through taxes is intended to finance public infrastructure, healthcare, education, welfare schemes, salaries, pensions, and other developmental programmes across the State. Once tax has been deducted from contractors’ bills, it forms part of the Government’s revenue and is expected to be credited to the State Government Account without undue delay. Prolonged retention of such revenue outside the Government treasury system deprives the State Government of the timely utilisation of public funds, raises serious concerns over financial discipline and transparency, and defeats the very purpose for which the tax was collected.
As per the latest information available with Imphal Times, the Rural Engineering Department has not deposited the deducted VAT into the State Government Account as of the filing of this report.
