No 'Diversion' Of GST Compensation, Says Centre After Auditor's Report

GST compensation to states this yr has been affected by the Covid pandemic (Representational)

New Delhi:

The Finance Ministry has dismissed allegations of a “diversion” of Rs 47,271 crore from the GST Compensation Cess Fund – a non-lapsable fund into which GST cess is transferred and from which compensation is paid to states – and stated all quantities attributable to state and union territories for 2017/18 and 2018/19 had been totally paid.

The time taken in reconciliation of compensation receipts, Finance Ministry sources stated, couldn’t be known as “diversion… when dues to states had been totally launched by the central authorities”.

Issues concerning the GST Compensation Cess Fund had been raised after a report by the Comptroller and Auditor Common (CAG) stated the federal government had wrongly retained round Rs 42,000 crore of GST compensation cess.

In its report the CAG identified that in response to regulation the quantity collected as GST cess for the yr is to be transferred to the GST Cess Fund for distribution to states as compensation for lack of income.

The report stated that in 2017/18 the transferred quantity was brief by Rs 6,466 crore and, the next yr, it was brief by Rs 40,806 crore. The mixed quantity, the CAG stated, “grew to become out there to be used for functions aside from what was supplied within the Act”.

Finance Ministry sources, nevertheless, identified that per the regulation all quantities, together with taxes and cesses, collected by the centre should first be credited within the Structure Fund of India (CFI) and solely thereafter be transferred.

Sources stated that for the reason that last quantities collected are recognized solely on the finish of the monetary yr, any quantity collected over and above estimated collections, would stay, quickly, within the Consolidated Fund of India (CFI).

“Due to this fact, such short-term retention of GST cess in CFI, pending reconciliation, can’t be handled as diversion by any stretch of creativeness,” one ministry supply stated.

The Finance Ministry additionally identified that the CAG had not talked about “diversion” of funds, however merely that there was an obvious error in reconciliation.

GST compensation has emerged as a sore level with state and union territory governments this yr, significantly with the hostile financial impression of the Covid pandemic and lockdown.

The centre is discovering it tough to pay states compensation – due if a state’s income grows slower than 14 per cent – as a result of states haven’t earned a lot this yr attributable to months of lockdown necessitated by the COVID-19 disaster.

The Congress had known as the delay in paying GST compensation a “sovereign default” and going again on constitutional ensures that had been the explanation states got here on board with the GST regime. A number of opposition-ruled states, together with Bengal and Kerala, have been equally upset.

After a gathering of the GST Council earlier this yr, state and UT governments had been requested to borrow – both the complete quantity of Rs 2.35 lakh crore (which included Covid reduction) or Rs 97,000 crore (which was solely GST compensation).

Final week a number of states and UTs submitted their borrowing proposals.

With enter from PTI