Govt after CAG report: No diversion of GST cess

1.jpg The government has dismissed suggestions of diverting GST compensation cess into its books and said that the money was temporarily lying in the Consolidated Fund of India, pending reconciliation. In its latest report, the Comptroller and Auditor General of India had said that during 2017-18 and 201819, there was “short crediting” of compensation cess of around Rs 47,000 crore, which resulted in overstatement of the Centre’s revenue receipts and understatement of fiscal deficit. The finance ministry chose to respond to political criticism from Kerala finance minister Thomas Isaac, who had alleged “diversion” of funds. Denying the charge, a government source said: “…whatsoever was the compensation due to the states for the year 2017-18 and 201819 were fully paid and the time taken in reconciliation of compensation receipts can’t be termed as diversion of GST Cess Fund when the dues were fully released by the central government.” Finance ministry officials said the compensation receipt in the CFI was subject to reconciliation in the coming months in the subsequent financial year.

 “If for that reason the amount remained in the Consolidated Fund of India, how can that be treated as ‘diversion’? Even the CAG in its report has not said so,” a source said. Officials said in line with the Constitutional provi sions, receipts including taxes and cess collected by the Centre need to be first credited into CFI before being transferred to another fund through a budget head. In case of the GST compensation cess, officials said since the final accounts are known only after the end of the financial year, usually around June-end, the excess amount temporarily stays in CFI. “After reconciliation, the amount is transferred to Compensation Fund and from that Fund to states as per their compensation formula,” a source said. During 2017-18, Rs 62,611 crore was collected as compensation cess and Rs 41,146 crore was paid to states. In 2018-19, against collections of Rs 95,081 crore, Rs 69,275 crore was paid. While Rs 47,271 crore did remain unutilised for reconciliation after payment of all the dues, the money has been used up subsequently. “Therefore, it can’t be said that this Rs 47,721 crore was diverted for other uses,” said a source. Read More at: https://timesofindia.indiatimes.com/business/india-business/no-diversion-of-gst-cess-govt-after-cag-report/articleshow/78342219.cms