CAG: 40% of cess collections not going to designated funds


NEW DELHI: The Comptroller and Auditor General has pulled up the government for diverting a large chunk of the money it collected as cess to the general pool making it difficult to ensure that the funds were used for the intended purpose. It also said the Centre had overstated its revenue and transferred a lower share of Goods and Services Tax (GST) to the states than it should have.
A CAG report on government finances tabled in Parliament found that the Centre did not transfer nearly 40% of the cesses to the designated funds. “…Out of the Rs 2,74,592 crore received from 35 cesses, levies and other charges in 2018-19, only Rs 1,64,322 crore had been transferred to reserve funds/ boards during the year and the rest was retained in the CFI (Consolidated Fund of India),” the report observed.
The Centre levies cesses with the stated purpose of providing dedicated funding to a whole host of activities, from education to roads and cleaning the environment.

The result of this diversion of cess collections, the CAG said was that, “not only was the revenue/ fiscal deficit understated due to the non-transfer of these amounts to reserve funds, failure of the ministry of finance to create/operate essential Reserve Funds makes it difficult to ensure that the cesses etc, had been utilised for the specific purposes intended by Parliament.”
Further, it pointed out that there was incorrect accounting of around Rs 10,000 crore from the Central Road Fund, which was shown as non-tax revenue, and resulting double counting as the money had already been accounted for in the tax receipts.
The problems related to GST allocation, pointed by the CAG, come at a time when the Centre and the states are fighting over the compensation cess and some of the opposition-ruled states have already flagged the discrepancy.
Last year too, the CAG had reported that devolution of integrated GST of close to Rs 68,000 crore to states and UTs was inconsistent with the legal provisions. “Government of India was advised to account for its IGST share correctly, apportion 50% to the states as per the IGST Act, and thereafter also devolve to states their share under Article 270,” the report said.
During 2018-19, Rs 15,001 crore had been devolved to states and UTs. “Audit examination showed that Rs 13,944 crore was left unapportioned under Major Head 0008 and retained in the CFI though the amended IGST Act now provides for a process for ad hoc apportionment of IGST. No reasons were provided by department of revenue for non-apportionment of this balance amount,” the report noted.
Due to “the continued adoption of the erroneous process of devolution of IGST to states and retention of unapportioned balance in the CFI instead of first apportioning IGST between the Centre and states/UTs and then devolving states’ share from the amount apportioned to the Centre”, states received less money, it concluded.
“This also implies that tax receipts of the GoI were overstated to that extent and the revenue deficit understated during the year,” the CAG said.

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