Temporary GST compensation retention isn't diversion of cess

Reacting to the CAG report regarding diversion of funds meant for GST compensation Finance Ministry sources said on Saturday that the time taken in reconciliation of compensation receipts cant be termed as diversion of GST Cess Fund when dues to states were fully released by the CentreA Comptroller and Auditor General CAG report tabled in Parliament this week said that there was short crediting to the Fund of the GST Compensation Cess collections totalling Rs 47272 crore during 201718 and 201819 in violation of the GST Compensation Cess Act 2017The money was allegedly used for other purposes which led to overstatement of revenue receipts and understatement of fiscal deficit for the yearThe sources said that the compensation receipt in the CFI Consolidated Fund of India was subject to reconciliation in the coming months as usual in the forthcoming financial yearIf for that reason the amount remained in the CFI how can that be treated as diversion Even the CAG report has not said so that the compensation cess was diverted It may be worth noting that the amount collected under compensation cess fund has been regularly and fully distributed to the states as per their dues and budgetary provisions By the end of July 2020 everything has been accounted for and released If this is so then where is the question of any diversion the sources askedGST compensation is a sensitive issue and came into focus recently after several states questioned the Centre about the delay in the release of moneyThere is still a delay in the release of GST compensation to states for a fivemonth period In fact the Centre is working with the states through the GST Council on a new GST compensation scheme this year to meet the huge shortfall in cess collection expected on account of Covid19The sources explained that all money including taxes and cesses etc collected by the Centre should under Article 266 of the Constitution get credited first to the Consolidated Fund of India CFI and only then transferred to any other fund through a Budget Head in the Union BudgetThe government makes all efforts to transfer all amounts collected by the end of every financial year into the Fund by making the necessary Budget provisionsThe Ministry sources acknowledged that the Compensation Act requires that the amount of cess collected in the CFI should be transferred to the Compensation Fund and the compensation released to the states from the FundThe cess first gets collected in the Consolidated Fund of India since Article 266 requires that all amounts collected by the Centre should get credited to the Consolidated Fund of India It is further transferred to the Compensation Cess Fund through a Budget Head in the Union BudgetHowever since the final accounts of money collected are known only after the end of the financial year normally by the end of June of next fiscal after necessary reconciliation any amount collected over and above the estimate will remain in the CFI temporarilyAfter reconciliation the amount is transferred to the CFI and from there to the states as per their compensation formulaTherefore such temporary retention of GST cess in the CFI pending reconciliation cannot be treated as diversion by any stretch of imagination a top Ministry source explainedFinally at any point since the cess collected by the government has been used for full payment of due compensation then it cannot be alleged that unutilised cess amount has been diverted for other purposesIn FY 201718 Rs 62611 crore was collected of which the government released full compensation dues of Rs 41146 crore to the states and UTs further in FY 201819 Rs 95081 crore was collected of which Rs 69275 crore was paid as full compensation dues to the states and UTsA total of Rs 47271 crore collected in FYs 201718 and 201819 had remained unutilised for reconciliation post the full payment of GST compensation dues to the states and UTsIt is definitely not the case that in FY 201718 and FY 201819 the compensation was payable to the states but the cess was kept in the CFI and not paid to the states said the sourcesAlso for fiscal 201920 the central government released Rs 165302 crore as GST compensation against a cess collection of Rs 95444 crore only during FY 1920 which it could do with the unutilised cess of Rs 47271 croreCatch up on all the latest Crime National International and Hatke news here Also download the new midday Android and iOS apps to get latest updates MidDay is now on Telegram Click here to join our channel middayinfomedialtd and stay updated with the latest newsThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever