According to the CAG audit, the Union government collected Rs 95,081 crore as GST compensation assignment in 2018-19, but only transferred Rs 54,275 crore to the GST compensation fund.
The Union government violated the GST Compensation Cessation Act, 2017, by wrongly withholding Rs 47,272 crore in the Consolidated Fund of India (CFI) during 2017-18 and 2018-19. It was supposed to credit it to the GST compensation fund, which is then supposed to be distributed to state governments. However, the Union government withheld the money from itself, the Comptroller and Auditor General (CAG) of India has discovered. According to the report, this amount was made available for other purposes.
This was revealed in the CAG’s audit report on the accounts of the Union Government for 2018-19. Ironically, this comes just a week after Finance Minister Nirmala Sitharaman asserted in Parliament that there was no provision in the law to compensate states for lost revenue from the GST of the Consolidated Fund of India.
The CAG noted that crediting less than it should to the GST fundraising fund was a violation of the GST Offset Cessation Act of 2017.
“The amount for which the tax was paid short was also withheld in the CFI and made available for use for purposes other than those provided by law,” said the CAG report, which recommended that the Ministry of Finance take action corrective immediately.
According to the CAG audit, the Center collected Rs 95,081 crore as GST compensation payment in 2018-19, but only transferred Rs 54,275 crore to the GST compensation fund. This fund already had 15 billion rupees.
After this, Rs 69,275 crore was paid as GST compensation to the Union states and territories.
According to the CAG report, the Union government “saved” Rs 35,725 million by not transferring the amount it was supposed to transfer to the fund. He adds that the government “saved” another Rs 20,725 crore because states only got Rs 69,275 crore out of the total they are supposed to get, which is Rs 90,000 crore.
Several states have been fighting with the Union government over the deficit in GST compensation, contrary to what was promised when the regime was incorporated. Citing a financial crisis, the Union government gave the states the option to borrow the deficit, which was met with opposition from several states not governed by the BJP.
The CAG also added that the Ministry of Finance accepted the audit observation and said that the proceeds of the tax collected and not transferred to the Public Account would be transferred in the following year.
According to the approved accounting procedure, the termination of GST Compensation must be transferred to the Public Account under the heading ‘2047-Other fiscal services’. Instead, the Ministry of Finance moved the funds to ‘3601-Transfer of grants in aid to the States’.
Aid grants are payments made by the Union government to states in the form of assistance, donations, or contributions.
Moving it to aid grants, the CAG noted, has implications for aid grant reporting because the GST Compensation Cess is a right of states and is not an aid grant.
Regarding other taxes and levies, the CAG audit noted that of the Rs 2,74,592 crore that the union government received from 35 dismissals, levies and other charges in 2018-19, only Rs 1,64,322 crore had been transferred a Reserve Funds / Meetings during the year and the rest was retained in the CFI.
This included collections amounting to Rs 382 crore due to 17 terminations abolished / subsumed in GST with effect from July 1, 2017, which remained in the CFI.
Reserve funds are funds designated for a specific use by the central government.
Since the government did not transfer these amounts to reserve funds, says the CAG, revenue and the fiscal deficit were underestimated and the inability of the Ministry of Finance to operate essential reserve funds “makes it difficult to guarantee that the funds, etc., have been used for the specific purposes provided by Parliament.
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