Union government temporarily retained Rs 47,272 crore GST cess
The Union government had temporarily retained Rs 47,272 crore excess Goods and Services Tax (GST) compensation cess in the Consolidated Fund of India (CFI) pending reconciliation, which cannot be construed as a diversion as the money was fully utilised in providing compensation to states, two officials said.
The amount collected as GST compensation cess has not been used for any other purpose, the officials working in the finance ministry said requesting anonymity.
They were commenting on observations of a recent report prepared by the Comptroller and Auditor General (CAG) that pointed out “short crediting” of Rs 47,272 crore cess in the non-lapsable GST Compensation Cess Fund. The amount was collected for 2017-18 and 2018-19.
“The short-crediting was a violation of the GST Compensation Cess Act, 2017. The amount by which the cess was short credited was also retained in the CFI and became available for use for purposes other than what was provided in the act,” said the CAG report on ‘Accounts of the Union Government’, which was tabled in the Parliament on September 23.
The finance ministry “accepted the audit observation” and told CAG in February this year that the proceeds of cess collected and not transferred to the Public Account would be transferred in the subsequent year, the report said.
Explaining the technical nuances of short crediting, the report said: “Short crediting of cess collected during the year led to overstatement of revenue receipts and understatement of fiscal deficit for the year. Further, any transfer in the subsequent year would become an appropriation from the resources of that year and would require Parliamentary authorisation.”
One of the officials mentioned above said, “In all earnest, there has been no diversion of funds, whatsoever as to the compensation due to the states for the year 2017-18 and 2018-19 were fully paid and the time taken in the reconciliation of compensation receipts can’t be termed as diversion of GST Cess Fund when the dues to states were fully released by the Centre.”
The CAG, in its report, has not said that the cess was diverted, he said. “The amount collected under-compensation cess fund has been regularly and fully distributed to states as per their dues and budgetary provisions and by the end of July 2020 everything has been accounted for and released,” he added.
The Union government had released the entire Rs 1,65,302 crore as GST compensation for 2019-20 to states by July this year even as the actual collection in the fiscal year was only Rs 95,444 crore.
“To release the compensation for 2019-20, the balance cess amount collected during 2017-18 and 2018-19 was also utilised. In addition, the Centre had transferred some amount from CFI to meet the requirement,” a second official said.
At the time of introducing the new indirect tax regime, the GST law assured state governments a 14% increase in their annual revenue for five years and the Centre committed to meet any shortfall in revenue through the cess levied on luxury goods and sin products such as liquor, cigarettes, aerated water, automobiles, coal and other tobacco commodities.
The officials said the government makes all efforts to transfer all amounts collected by the end of every financial year into designated funds by making necessary budget provisions.
“The amount of cess collected first gets collected in CGI since Article 266 requires that all amounts collected by the Centre should get credited to the CGI. It is further transferred to the Compensation Cess Fund through a budget head. However, since the final accounts of amounts collected are known only after the end of the financial year, normally by the end of June next year after necessary reconciliation, any amount collected over and above the estimate, will remain in CFI temporarily,” the first official said.