Central Government Violated to Rule Regarding GST Compensation to States: CAG Report


According to the CAG report, the possession of ₹47,272 crore GST compensation cess by the central government violates the rules. According to the law, to meet the reduced income due to the introduction of GST, the sum must be allocated among the states. However, the central government retained the amount for its own.

In the audit report of Government of India, the Comptroller and Auditor General of India has written a note marking the amount raised in the first two years of Goods and Services Tax implementation separately.

According to the CAB report, the Central Government should deposit the amount in the non-lapsable GST Compensation Cess Collection fund. This fund was to compensate states instead of revenue loss due to GST implementation from 2017. But the government did not do so. Hence, the government is violating the GST compensation law.
According to CAG, ₹62,612 crores was raised as GST cess in the financial year 2017-18. But out of this only ₹, 56,146 crores was transferred to the Compensation Cess Collection Fund. In the year 2018-19 out of ₹ 95081 crores, only ₹ 54,275 crores were deposited in the fund. The government showed the amount of ₹ 6466 crores in 2017-18 and ₹ 40,860 in 2018-19 as for “other purposes” in its account. This shows the excess of revenue receipts and reduction in fiscal deficit in the governments account that year.

With the CAB report, the dispute between the centre and the states regarding cess compensation will intensify. States have not been able to get the compensation for GST as promised from the previous fiscal year.

The central government has argued for the economic slowdown as a reason for insufficient funds. Centre has advised the states to raise debt from the market to meet this revenue shortfall. But States with opposition parties like Congress, Left, Trinamool etc. have opposed the suggestion of the central government.

The facts revealed in the CAG report are also contrary to the answers given by Finance Minister Nirmala Sitharaman in parliament last week. Sitharaman said that there is no provision regarding the use of the Consolidated Fund of India (CFI) in the law to compensate states for the revenue shortfall. In its report, the CAG has said that such provision exists.


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