GST Compensation Cess: Temporary retention of GST cess pending reconciliation not diversion: Finance ministry
Days after the CAG flagged that the Centre in first two years of the GST implementation wrongly retained GST reimbursement cess that was once supposed for use particularly to compensate states for lack of income, ministry resources stated reimbursement due for the yr 2017-18 and 2018-19 was once absolutely paid to states.
Time taken in reconciliation of reimbursement receipts cannot be termed as diversion of GST cess fund when the dues to states have been absolutely launched by way of the central executive, they stated.
Assets stated that during 2017-18, Rs 62,611 crore was once accrued, out of which the federal government launched complete reimbursement dues of Rs 41,146 crore to the states and union territories (UTs).
In 2018-19, an quantity of Rs 95,081 crore was once accrued, out of which Rs 69,275 crore was once paid as complete reimbursement dues to states and UTs.
They stated an quantity of Rs 47,271 crore accrued within the 2017-18 and 2018-19 had remained unutilised for reconciliation submit complete fee of GST reimbursement dues.
For the yr 2019-20, the central executive launched Rs 1,65,302 crore as GST reimbursement towards a cess selection of Rs 95,444 crore which it might achieve this with the unutilised cess of Rs 47,271 crore.
The GST (Reimbursement to States) Act promises all states an annual expansion price of 14 consistent with cent of their GST income within the first 5 years of implementation of GST starting July 2017. It was once presented as a aid for states for the lack of revenues bobbing up from the implementation of GST.
If a state’s income grows slower than 14 consistent with cent, it’s meant to be compensated by way of the Centre the usage of the price range particularly accrued as reimbursement cess. To offer those grants, a GST reimbursement cess is levied on sure luxurious and sin items.
The accrued reimbursement cess flows into the consolidated fund of India (CFI), and is then transferred to the Public Account of India, the place a GST reimbursement cess account has been created. States are compensated bi-monthly from the collected price range on this account.
Then again, as a substitute of shifting all of the GST cess quantity to the GST reimbursement fund all the way through 2017-18 and 2018-19, the CAG discovered that the Centre retained those price range within the CFI and used it for different functions.
The finance ministry resources stated the reimbursement receipt within the CFI was once matter to reconciliation within the coming months, as same old, within the approaching monetary yr.
If because of this the volume remained within the CFI, how can that be handled as diversion, they requested including even the CAG in its document has now not stated so.
The quantity accrued underneath reimbursement cess fund has been steadily and entirely allotted to states as consistent with their dues and budgetary provisions and by way of the tip of July 2020, the whole lot has been accounted for and launched, supply added.
The CAG in its document tabled in Parliament previous this week stated out of the Rs 62,612 crore GST Reimbursement Cess accrued in 2017-18, Rs 56,146 crore was once transferred to the non-lapsable fund.
Within the following yr (2018-19), Rs 54,275 crore out of Rs 95,081 crore accrued was once transferred to the fund.
The quick switch in 2017-18 was once Rs 6,466 crore and in 2018-19 it was once Rs 40,806 crore, the CAG stated including the Centre used this cash for “different functions” which “ended in an overstatement of income receipts and understatement of fiscal deficit for the yr”.
Assets defined that each one quantities together with taxes and cess which can be accrued by way of the Centre must, underneath the Article 266 of the Charter, get credited first to the CFI after which handiest it might be transferred to some other fund thru the cheap head in Union Funds.
The federal government makes all efforts to switch all quantities accrued by way of the tip of each and every monetary yr into the fund by way of making vital funds provisions, they stated.
In case of reimbursement cess, for the reason that ultimate accounts of quantities accrued are recognized handiest after the tip of economic yr, any quantity accrued over and above the estimate will stay within the CFI quickly, they stated including after reconciliation, the volume is transferred to Reimbursement Fund and from that fund to states as consistent with their reimbursement system.
Subsequently, such transient retention of GST cess in CFI pending reconciliation can’t be handled as diversion by way of any stretch of creativeness, resources stated.
Because the cess accrued by way of the federal government has been used for complete fee of due reimbursement, then it can’t be alleged that unutilized cess quantity has been diverted for different functions, they insisted.