Follow real-time updates on Union Budget 2023Catch exclusive videos on Union Budget 2023 from CNBC-TV18
In FY19 Rs 95,081 crore was collected as GST cess and the Centre credited only Rs 54,275 crore to the compensation fund.
The Comptroller and Auditor General of India (CAG) came down heavily on the Centre for violating the law with regards to cess funds that the government collects. The CAG found the Centre had retained Rs 47,272 crore of GST compensation cess in the Consolidated Fund of India (CFI) during 2017-18 and 2018-19.
Recommended ArticlesView All
Vodafone-Idea Saga — Three parents but none to love
Feb 6, 2023 IST6 Min(s) Read
World Cancer Day 2023: Early detection is crucial for reducing the global burden
Feb 4, 2023 IST5 Min(s) Read
World Cancer Day 2023: A way forward to better management of cancer this year!
Feb 4, 2023 IST6 Min(s) Read
Pakistan economy at alarming level as foreign reserves drop to $3.1 billion from $16.6 billion in a year
Feb 3, 2023 IST3 Min(s) Read
The CAG has found multiple discrepancies in the usage and payments of the cess by the Centre, which was to be passed on to states -- be it GST compensation cess fund (which is due to states), or the road and infrastructure cess fund.
According to the CAG report, short-crediting was a violation of the GST Compensation Cess Act, 2017, and it has recommended the Finance Ministry to take immediate corrective action.
"Short-crediting was a violation of the GST Compensation Cess Act, 2017. It is recommended that Ministry of Finance take immediate corrective action," the CAG report said.
"Collection of the cess and its transfer to the GST Compensation Cess Fund, shows that there was short crediting to the Fund of the GST Compensation Cess collections totalling to Rs 47,272 crore during 2017-18 and 2018-19," the report added.
"The amount by which the cess was short credited was retained in the Consolidated Fund of India (CFI) and became available for use for purposes other than what was provided in the Act. GST Compensation cess was to be transferred to the Public Account by debit to Major Head '2047-Other fiscal services'. Instead, Ministry of Finance operated the Major Head ‘3601-Transfer of Grants in aid to States’. The wrongful operation has implications on the reporting of Grants in aid, since the GST Compensation Cess is the right of the States and is not a Grant in aid," the report noted.
In FY18, Rs 62,616 crore was collected as GST compensation cess and only Rs 56,146 crore was transferred to the Compensation Fund. Similarly, in FY19 Rs 95,081 crore was collected as GST cess and the Centre credited only Rs 54,275 crore to the compensation fund. According to the Compensation Act, states have the right to the compensation and the Centre only collects the fund since, all GST collections are first received by Centre and is then transferred to states under various heads.
CAG said that the short credited fund was transferred to the CFI, by the Centre.
Meanwhile, Finance Ministry has told the CAG that short credited fund will be transferred to states next year.
Also, CAG found that short crediting of cess collected during the year, led to overstatement of revenue receipts and understatement of fiscal deficit for the year. The transfer in the subsequent year would require Parliamentary authorisation.
Meanwhile, CAG findings said that it was not just the compensation funds which were short credited, but IGST funds were also not shared properly as per rules with states.
The CAG report added that during FY19, states received less funds on account of IGST in FY19. Rs 15,001 crore was erroneously transferred and accounted as state's share of net proceeds of IGST and the rules do not provide for assignment of share of net proceeds of IGST to states.
Similarly, when it comes to the road and infrastructure cess, CAG said that Rs 10,175 crore of road and infra cess was not used for the purpose it is supposed to be used for.
"Rs 10,880 crore was not transferred to CRIF on the tenuous ground that accounting procedures for Central Road and Infrastructure Fund (CRIF) had not been finalised; the amount, however, was spent for intended purposes as General Budgetary Support (GBS).This left Rs10,157 crore which was not transferred/ utilized for the purpose for which the cess was collected. It is recommended that Ministry of Finance review the balance amount of cesses collected under the CRF/CRIF Act so that amounts not spent for the intended purposes are computed and transferred to the CRIF," the CAG report said.
Similarly, Rs 1.24 lakh crore of crude oil cess too is something that CAG found discrepancies. "Due to non-transfer to Oil Industry Development Board (OIDB), the cess was retained in CFI. As a result, there was no assurance if the cess was used for the purpose for which these were collected," CAG observed.
First Published: Sept 25, 2020 10:10 PM IST