Government Says No Diversion of GST Cess After CAG Report

Comptroller and Auditor General (CAG) of India has pointed out “short crediting” of GST Compensation Cess approximating to Rs 47,272 crore in its fund. The amount was collected for FY 2017-18 and FY 2018-19. The FinMin officials have counter-argued that the parking of funds was due to pending reconciliation. Hence, it cannot be interpreted as any diversion since the money was fully utilised in providing compensation to states.

The sum of short credit was retained in the Consolidated Fund of India (CFI) and made available for use for purposes other than those provided for in the Act, said the CAG report. The report was on ‘Accounts of the Union Government’ tabled in Parliament on 23rd September 2020.

In February 2020, the Ministry of Finance “accepted the audit observation” and informed CAG that the cess proceeds would be credited in the following year, the report said. The cess was obtained but not credited to the Public Account.

While explaining the technical complexities of short credit, the report stated the following. “The under-credit of cess received during the year resulted in the year’s tax receipts being overestimated and the year’s fiscal deficit being understated”. In addition, any transfer in the following year would be an appropriation from the wealth of that year and would entail the authorisation of the Parliament.

Also Read: 41st GST Council Meet: 2 Options Offered to Meet the Compensation Cess Shortfall

One of the officials referred to earlier exclaimed, “In all seriousness, there has been no diversion of funds, regardless of the compensation due to the states for the years 2017-18 and 2018-19. The period considered in the reconciliation of compensation receipts has not seen any diversion of the GST Cess Fund when the Centre has completely released the dues to states”.

In its report, the CAG did not mention that the cess had been diverted, he said. “As per their dues and budgetary arrangements, the amount collected under the compensation cess fund was periodically and entirely allocated to states. Everything was accounted for and published by the end of July 2020,” he added.

An amount of Rs 62,611 crore was received as cess collections during the financial year 2017-18. Out of this, Rs 41,146 crore was paid to states. In 2018-19, Rs 69,275 crore was paid against collections of Rs 95,081 crore. Although Rs 47,271 crore remained unused after the payment of all debts for reconciliation, the money was subsequently paid off to the states.

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