Centre Diverted Funds For GST Compensation

Table of Contents

What is a cess?

Cess is a form of tax charged/levied over and above the base tax liability of a taxpayer.
A cess is usually imposed additionally when the state or the central government looks to raise funds for specific purposes.

As per the provisions of the GST Compensation Cess Act,
The entire cess collected during a year is required to be credited to a non-lapsable fund which is part of the Public Account.
It is meant to be used specifically to compensate states for loss of revenue.
CAG’s report on the accounts of the Union government were tabled in Parliament on Wednesday, the last day of the Monsoon session.
CAG in its report has found that the government violated the law by retaining Rs 47,272 crore of GST compensation cess in the CFI during 2017-18 and 2018-19,
And used the money for other purposes, which
“led to overstatement of revenue receipts and understatement of fiscal deficit for the year”.
“Audit examination of information in Statements 8, 9 and 13 with regard to 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 CAG has said.
“The short-crediting was a violation of the GST Compensation Cess Act, 2017.”

During 2018-19, Rs 90,000 crore was budgeted for release to States as compensation.
However, though Rs 95,081 crore was collected during the year as GST compensation cess,
Department of Revenue transferred only Rs 54,275 crore to the Fund.

On September 18, replying to the debate on the first batch of Supplementary Demands for Grants for the current financial year in Lok Sabha, Sitharaman said,
“Cess ke dwara jitna compensation collect hota hai, woh hota hai compensation jise state ko dena hota hai… agar cess collection mein kuchh nahin hai, to nahin hai.”
The A-G has given his opinion that there is no provision in the GST law to give (compensation) from the Consolidated Fund…”

Apart from the GST compensation cess, the CAG has also mentioned instances of non-transfer of entire amounts of other cesses to their respective Reserve Funds,
Including the Road and Infrastructure Cess, Cess on Crude Oil, Universal Service Levy, and National Mineral Trust Levy.
“Audit observed, that out of the Rs 2,74,592 crore received from 35 cesses, levies and other charges in 2018-19,
Only Rs 1,64,322 crore had been transferred to Reserve Funds/ Boards during the year and the rest was retained in the CFI,”
The report says, “It is recommended that Ministry of Finance take immediate corrective action.”

According to the CAG report, the Ministry of Finance has accepted the audit observation, and has stated that “the proceeds of cess collected and not transferred to Public Account would be transferred in subsequent year”.

Q) Which of the following statements with respect to CAG is correct?

1- Office of the Accountant General in India was established in the year 1858.

2- The CAG was made independent of the government through the Government of India Act 1919.

3- CAG’s jurisdiction was extended to Jammu and Kashmir in 2019.

4- CAG can be removed by the President only.