Temporary retention of GST compensation in the Consolidated Fund isn't diversion: FinMin Sources

Temporary retention of goods and services tax (GST) compensation in the Consolidated Fund of India (CFI) pending reconciliation cannot be termed as diversion, finance ministry official said, adding that full compensation to states was provided for FY 2017-18 and 2018-19.
"In all earnest there has been no diversion of funds... the time taken in reconciliation of compensation receipts can’t be termed as diversion of GST Cess Fund when the dues to states were fully released by the Central government," a senior official said.

The official added that compensation receipt in the CFI was subject to reconciliation in the coming months, as usual, in the forthcoming financial year. "By the end of July 2020 everything has been accounted for and released... where is question of any diversion?" he said.

The official said that it was not the case that in FY 17-18 and FY 18-19, the compensation was payable to the states but the Cess was kept in the CFI and not paid to the states. Further, for the year 2019-20, the Central Government released Rs 1,65,302 crore as GST compensation against a cess collection of Rs 95,444 crore only during the FY 19-20, which it could do so with the unutilized cess of Rs 47,271 crore.

"Therefore, it cannot be said that this Rs 47,721 Crore was diverted for other uses, said the sources," the official noted.

In the FY 2017-18, Rs 62,611 crore were collected, out of which the Government released full compensation dues of Rs 41,146 crore to the States and UTs; further, in the FY 2018-19, an amount of Rs 95,081 crore were collected, out of which Rs 69,275 crore were paid as full compensation dues to States and UTs.

The Comptroller and Auditor General of India has said in its audit report of government accounts that the government wrongly retained Rs 47,272 crore of GST compensation in the CFI in 2017-18 and 2018-19 and used it for other purposes.

“Audit examination of information in Statements 8, 9 and 13 with regard to collection of the cess and its transfer to the GST Compensation Cess Fund, shows 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,” the CAG noted.

“The short-crediting was a violation of the GST Compensation Cess Act, 2017… It is recommended that the Ministry of Finance take immediate corrective action,” the national auditor said in a report tabled in Parliament earlier this week.