NEW DELHI : The temporary withholding of goods and services tax (GST) in the Consolidated Fund of India (CFI) in fiscal year 2018 and fiscal year 2019 is not a diversion of funds, an official from the Ministry of Finance said in response to an observation made by the Comptroller and Auditor General. of India, (CAG).
The government statutory auditor had said in the financial audit report for fiscal year 2019 presented in Parliament that there was a short credit from the GST offset tax collection, totaling ₹Rs 47,272 crore, during FY 2018 and FY 2019 to the GST Termination Compensation Fund, which is part of the public account.
Unlike the CFI, withdrawals from the public account do not need the approval of Parliament and the funds do not belong to the central government.
The audit report noted that this brief accreditation was in violation of the GST Offsetting Act of 2017. It also said that the fund held at CFI was available for use for purposes other than those provided by the Act, an opinion that the Ministry of Finance does not match.
The central government withheld the unused amount after making the full compensation payment to the states over the years. Additionally, in fiscal year 2020, the Center launched ₹1.65 trillion as GST compensation to states, although only ₹Rs 95,444 crore was collected as a fee in that year. This was done with previously unused tax collection and therefore cannot be called diversion, the official clarified.
The ministry is of the opinion that the temporary retention of the GST compensation receipt at CFI pending conciliation cannot be classified as “deviation”. The compensation owed to the states for the two years was paid in full and the time required to reconcile compensation receipts cannot be classified as a deviation from the GST cessation fund, said the official, who spoke on condition of anonymity.
All amounts, including taxes and fees collected by the Center, are first credited to the CFI and only then transferred to any other fund through a budget heading in the Union budget. “The government makes every effort to transfer all the amounts collected at the end of each financial year to the Fund by adopting the necessary budgetary provisions,” said the official.
The official acknowledged that the GST Compensation Law requires that the assignment collected in the CFI be transferred to the Compensation Fund and that the compensation be released to the states.
“Since the final accounts of the amounts collected are known only after the end of the financial year, normally at the end of June of the next year after the necessary reconciliation, any amounts collected above the estimate will remain in CFI temporarily. “After reconciliation, the amount is transferred to the Compensation Fund and from there to the states according to their compensation formula. Such temporary retention of the GST to cease in CFI pending reconciliation cannot be treated as a deviation by any stretch of the imagination, “the official clarified.
The CAG report had noted that the short crediting of the fees collected led to an overstatement of revenues and an underestimation of the fiscal deficit.
.
