REFERENCE : Report of the Comptroller and Auditor General of India for the year 2018-19 [Union Government] [Accounts of the Union Government] [No. 4 of 2020] (Financial Audit) Tabled on 23-September, 2020 (Full report attached at end)
- Para 2.4.4 of Report No. 4 of 2020 of CAG relates to Issues relating to accounting of Integrated Goods and Service Tax (IGST)
- Para 2.5 of Report No. 4 of 2020 of CAG lists the issues relating to accounting of Cesses and levies under various Tax Legislations (including GST Compensation Acts).
- Major cesses referred in para 2.5 ibid include GST Compensation Cesses (Rs. 95,028 crore or 35 per cent), Road and Infrastructure Cess (Rs. 51,273 crore or 19 per cent), Additional Excise Duty in High Speed Diesel Oil and Motor Spirit (Rs. 59,580 crore or 22 per cent), Health and Education Cess (Rs. 41,177 crore or 15 per cent).
2.5 Issues relating to accounting of Cesses and levies 28
2.5.1 GST Compensation Cess
2.5.2 Road and Infrastructure Cess
2.5.3 Health and Education Cess
2.5.4 Cess on Crude Oil
2.5.5 Universal Access Levy
2.5.6 National Mineral Trust Levy
2.5.7 Discontinued/ Abolished Cesses
- CAG has found that various cesses/levies collected for “specified purposes” were wrongly credited to general Consolidated Fund of India (CFI) and not “specific fund/Board” created for the purpose. The CAG has recommended proper accounting and transfer from CFI to relevant Fund/Board for which appropriation law would be required.
- Secondly, CAG has noted that GST compensation payments were wrongly classified as Grants-in-Aid to States.
Para 2.5.1 relating to GST Compensation Cess is as follows :
2.5.1 GST Compensation Cess
The GST Compensation Cess Act, 2017 provides for levy of a cess for the purpose of providing compensation to the States for loss of revenue arising due to implementation of GST for a period specified in the Act. As per the Act and the accounting procedure, the entire cess collected during the year is required to be credited to a non-lapsable Fund (the GST Compensation Cess Fund) which shall form part of the Public Account and shall be used for the purpose mentioned i.e., for providing compensation to the States for loss of revenue.
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 `47,272 crore during 2017-18 and 2018-19.
Details are given in Table 2.8 below:
Table 2.8: Short crediting of GST Compensation Cess (` in crore)
|Sl. No.||Year||Total collected||Total transferred to Fund||Short Transfer|
The short-crediting was a violation of the GST Compensation Cess Act, 2017. The amount by which the cess was short credited was also retained in the CFI and became available for use for purposes other than what was provided in the act. 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 subsequent year. Short crediting of cess collected during the year led to overstatement of revenue receipts and understatement of fiscal deficit for the year. Further, any transfer in the subsequent year would become an appropriation from the resources of that year and would require Parliamentary authorisation.
Further, as per the approved accounting procedure, GST Compensation cess was to be transferred to the Public Account by debit to Major Head ‘2047-Other fiscal services’. Instead, Ministry of Finance operated the Major Head ‘3601-Transfer of Grants in aid to States’. The wrongful operation has implications on the reporting of Grants in aid, since the GST Compensation Cess is the right of the States and is not a Grant in aid.
It is recommended that Ministry of Finance take immediate corrective action.