CAG critical of deficiency in cess utilisation
Till 31, March 2018, the total “short transfer” or amount not transferred was Rs 1,24,099 croreUpdated: Feb 18, 2019, 23:38 IST
The Union government has been pulled up by the Comptroller and Auditor General of India (CAG) for deficiencies in collecting cess and utilising it for its intended purposes, according to its report on the financial audit of accounts for 2017-18.
To be sure, the audit raises issues that go back to the turn of the decade, when a different government was in power, and which continue to the day — an indication that successive governments have been cavalier in their treatment of cess.
According to the government auditor, the central government collected Rs 2,14,050 crore in cess in 2017-18.
According to the ministry of finance, the government collected a total of Rs 2,35,307.75 crore cess in 2016-17.
“Major cess that were subsumed under Goods and Services Tax (GST) w.e.f 01 July 2017 are Krishi Kalyan Cess, Swachh Bharat Cess, Clean Energy Cess and Cess on Tea, Sugar and Jute etc. However, six Cess continue to be levied,” the report said.
A cess is a tax on a tax and usually levied for a specific purpose. And unlike other taxes that have to be shared with the states, the Centre gets to keep the entire amount raised by cess.
The six cess that continue to be levied are: Primary Education Cess, Secondary Education Cess, Education Cess on Imported Goods, Cess on Crude Petroleum Oil, Road Cess, NCCD on Tobacco and Tobacco Products and Crude Petroleum Oil.
These funds raised are to be kept in the Consolidated Fund of India, before being transferred to dedicated accounts.
But the audit also noted “short transfer of cess collected in Consolidated Fund of India (CFI) to the dedicated non-lapsable fund in public account”.
In some cases, even the entire amount was retained.
CAG found Rs 94,036 crore was collected under Secondary and Higher Education Cess (SHEC) which was levied in 2006-07.
“The Cess is being retained in the CFI, contrary to procedure, though a Fund (Madhyamik and Uchchtar Shiksha Kosh) for this purpose was created in August 2017, and has not been operationalised so far. This issue has been reported regularly in previous CAG reports,” Comptroller and Auditor General of India noted.
The R&D Cess Act, 1986, provides for levy and collection of a Cess on all payments made for the import of technology. After creation of Technology Development Board (TDB) in 1996, the money collected was to be disbursed as Grants-in-aid to TDB.
“Rs 8,077 crore was collected under R&D Cess from 1996-97 to 2017-18. Of this, only Rs 779 crore (9.64%) was disbursed to TDB. Further, though the Cess was abolished with effect from April 2017, Cess amounting to Rs 191.41 crore and Rs 1.14 crore was irregularly collected during 2017-18 and 2018-19 (September 2018) respectively,” the report found.
Till 31, March 2018, the total “short transfer” or amount not transferred was Rs 1,24,099 crore.
Of this, Rs 72,726 crore and Rs 44,505 crore were from Road/ Central Road Fund (collected from 1998-99) and clean energy cess/ National Clean Energy Fund (collected from 2010-11), respectively.
“Comments on short transfer of funds with respect to Road Cess and Clean Energy Cess have been repeatedly pointed out since 2010-11. However, the accounting authorities have taken no action in this regard,” CAG noted.
“When cess is levied, it is actually supposed to be spent on the specific purpose for which it is collected. The problem occurs when money is being collected but not allocated for its purpose, it could be getting diverted to other infrastructure projects. It is not a new phenomenon, CAG has been observing this continuously,” said Vishwas Udgirkar, partner, Deloitte India.
National Clean Energy Fund (NCEF) was created out of cess on coal produced in the country and imported.
This cess funds the Centre’s schemes, Namami Gange , Green India Mission and the National Solar Mission.
During the period 2015-16 to 2017-18, total allocation of ₹19,013.83 crore was made under the fund.
Under the provisions of the GST Act, 2017, the coal cess, along with some other cess, such as those on pan masala, tobacco, aerated water etc. were to go into the GST Compensation Fund and be used to compensate the states (for their potential loss in revenue from moving to GST).
A parliamentary panel said in December, 2018, that against a total amount of Rs 86,440.21 crore cess collected till the end of 2017-18, only Rs 29,645.29 crore was transferred to the fund.