The Comptroller and Auditor General (CAG) detected 1,334 cases of GST non-compliance in the works contract and construction sector, involving ₹401 crore. Works contracts under GST attract a standard rate of 12% for government projects and 18% for commercial construction. CAG audits routinely expose under-reporting of GST liability, incorrect input tax credit claims, and misclassification of contract types — all of which distort government revenue and affect rural infrastructure financing channelled through NABARD.

Works contracts under GST are a composite supply — combining goods (materials) and services (labour/construction). GST law treats them as a service supply, taxed at 12% for contracts involving the government, government authorities, or government entities for public interest projects, and at 18% for commercial construction. This distinction is critical and frequently exploited for non-compliance.

CAG's detection of 1,334 non-compliance cases worth ₹401 crore points to three main violation types: (1) incorrect GST rate application — contractors billing at 12% for projects that qualify at 18%; (2) wrongful input tax credit (ITC) claims on exempted supplies; and (3) misclassification of contracts to avail concessional rates.

For NABARD aspirants, the significance is direct. NABARD finances rural infrastructure — roads, irrigation, warehouses, cold chains — through its Rural Infrastructure Development Fund (RIDF). These are predominantly works contracts. GST leakages in this sector reduce the effective tax base, tighten government fiscal space, and can raise project costs when contractors front-load GST risk. CAG's audit function is a constitutional accountability mechanism (Article 149) that feeds into legislative scrutiny via Public Accounts Committee (PAC), ultimately influencing how scheme funds are disbursed and monitored. Understanding GST rate structures on construction is also essential because GST exemption/rate changes directly affect the cost of rural infrastructure schemes NABARD supports.