The Comptroller Auditor General in its report has said that there was short crediting to the Fund of the GST Compensation Cess collections totalling to Rs 47,272 crore during 2017-18 and 2018-19. This short-crediting was a violation of the GST Compensation Cess Act, 2017. Opposition parties are projecting this report as a serious violation of law by the government. But is it really a such a violation of law or just a hoax created to get the political benefit? Let us have a look :
What does the CAG say about the GST Compensation Cess collections?
The CAG has found that there was short crediting to the GST Compensation Fund of the GST Compensation Cess collections totalling to Rs 47,272 crore during 2017-18 and 2018-19. The short-crediting, the CAG said, was a violation of the GST Compensation Cess Act, 2017. The amount by which the cess was short credited was also retained in the Consolidated Fund of India and became available for use for purposes other than what was provided in the Act.
Does this mean that the government kept the money that was meant to be transferred to States?
No, as the CAG says in its own report:
“(Finance) Ministry accepted the audit observation and stated (February 2020) that the proceeds of cess collected and not transferred to Public Account would be transferred in the subsequent year.”
The Ministry of Finance announced via a press release on 27 July 2020 that it had transferred Rs. 33,412 crore from the Consolidated Fund of India to the Compensation Fund as a part of an exercise to apportion balance of IGST pertaining to 2017-18. Therefore, any short transfer in the past has been made up.
Did this short transfer result in lower compensation being paid to the States?
No, the Centre transferred the entire compensation due in 2017-18 and 2018-19. The Centre transferred Rs 41,146 crore in 2017-18 and Rs 69,275 crore in 2018-19. The States have not raised any issue with the compensation payments for those two years. In fact, for the compensation due in 2019-20, the total amount of compensation released for the year 2019-20 was Rs. 1,65,302 crore whereas the amount of cess collected during the year 2019-20 was Rs. 95,444 crore. This surplus compensation over and above the cess collections was made using the surplus collections in the previous two years. Therefore, there is no question of the Centre misusing the compensation cess collections or failing in its commitment to compensation the States.
Does this have any bearing on the compensation issue for 2020-21?
No, the compensation issue for 2020-21 pertains to short collections under the GST compensation cess due to the effect of the COVID-19 pandemic on economic activity. There is no connection between statements made and arguments provided regarding 2020-21 and the issues highlighted by the CAG pertaining to 2017-18 and 2018-19.