Key Details
The CAG audit identifies persistent weaknesses in revenue recovery, tax administration, audit compliance and legislative accountability, with large volumes of government dues remaining unrecovered and thousands of audit observations awaiting resolution.
Area | Observation | Scale / Impact |
|---|---|---|
Revenue Arrears | Accumulated arrears across departments | ₹30,308.52 crore (24.35% of State revenue) |
Long-Pending Dues | Arrears pending for more than five years | ₹11,067.27 crore |
Revenue Under Stay | Taxes blocked by legal and government stay orders | ₹5,923.42 crore |
SGST Refund Pendency | Unprocessed taxpayer refunds | 764 cases worth ₹448.86 crore |
Audit Backlog | Pending Inspection Reports and audit paragraphs | 2,461 IRs; 15,021 paras; ₹4,978.61 crore involved |
PAC Compliance | Recommendations awaiting action | 155 pending |
Revenue Irregularities | Under-assessment and other lapses detected through test audits | ₹849.92 crore |
What the Audit Reveals
Revenue Recovery Remains a Persistent Weakness
The audit finds that revenue arrears have continued to accumulate across major revenue heads, including State GST, land revenue, excise, and electricity duties. Total arrears stood at ₹30,308.52 crore, equivalent to nearly one-fourth of Kerala’s revenue receipts.
More than ₹11,067 crore has remained outstanding for over five years, suggesting that recovery challenges are increasingly structural rather than temporary. The findings point to weaknesses in enforcement, monitoring and follow-up systems that prevent assessed dues from being converted into realised revenue.
Litigation Is Delaying Revenue Realisation
A substantial ₹5,923.42 crore remains locked under court and government stay orders, with a majority of these cases pending for several years.
The audit notes that prolonged litigation, delayed disposal of cases and inadequate efforts to vacate stays have contributed to significant revenue blockages. This limits fiscal flexibility and delays the availability of resources for public expenditure.
Tax Administration Shows Uneven Progress
The report records improvements in certain areas of tax administration, including higher disposal rates for some assessment categories under SGST. However, performance remains uneven across departments and tax streams.
The audit also highlights 764 pending SGST refund cases worth ₹448.86 crore, exposing the government to potential statutory interest liabilities while creating uncertainty for taxpayers awaiting refunds.
Audit Follow-Up Systems Continue to Lag
One of the most significant concerns identified by the CAG is the scale of unresolved audit observations.
As of the audit period, 2,461 Inspection Reports containing 15,021 audit paragraphs remained pending, involving approximately ₹4,978.61 crore. Delays in submitting Action Taken Notes (ATNs) and responding to Public Accounts Committee (PAC) recommendations indicate weaknesses in departmental accountability mechanisms.
The report notes that 155 PAC recommendations remain pending, limiting the effectiveness of legislative oversight and corrective action.
Digitisation Alone Has Not Eliminated Administrative Gaps
The audit of the Motor Vehicles Department highlights shortcomings in the implementation of modernisation initiatives. Several Automated Driving Test Tracks (ADTTs) remain non-functional despite significant investments intended to improve transparency and standardisation in driver licensing.
The findings suggest that technology investments require stronger operational planning, maintenance and monitoring to deliver intended governance outcomes.
What is an Inspection Report (IR)?
An Inspection Report (IR) is a formal audit document issued by the CAG after examining the records and operations of a government department. It records financial irregularities, compliance failures, revenue losses and administrative weaknesses that require corrective action. Large backlogs of unresolved Inspection Reports often indicate weaknesses in institutional accountability and follow-up systems.
Policy Relevance
Highlights the need for a dedicated arrears-recovery strategy, particularly for cases pending beyond five years where the probability of recovery progressively declines.
Strengthens the case for faster disposal of revenue litigation, including periodic review of long-pending stay cases and improved coordination between revenue departments and legal authorities.
Suggests the creation of integrated recovery-monitoring systems that track arrears, assessments and refund pendency across departments in real time.
Reinforces the need for time-bound closure of audit observations, supported by digital dashboards tracking Inspection Reports, Action Taken Notes and departmental compliance.
Calls for stronger implementation of Public Accounts Committee recommendations to improve legislative oversight and accountability.
Highlights that public-sector digitisation projects require sustained operational oversight, not merely capital investment, to achieve intended governance outcomes.
Supports broader reforms aimed at improving revenue realisation rather than revenue assessment alone, ensuring that assessed dues translate into actual fiscal resources available for development spending.
Follow the Full Report Here: Report No.2 of 2026-The Report of the Comptroller and Auditor General of India on State Revenues for the period ended March 2024, Government of Kerala