Centre Denies ‘Diversion’ of GST Funds After CAG Flags Violations

There was no provision in the law to compensate states for loss of GST revenue, Sitharaman told Parliament earlier.

2 min read
File image of Union Finance Minister Nirmala Sitharaman.

The Finance Ministry has refuted the CAG’s findings of a "diversion" of Rs 47,271 crore from the GST Compensation Cess Fund, insisting that all amounts due to states and union territories had been fully paid.

The Comptroller and Auditor General of India (CAG) found that the Centre violated its own law on the Goods and Services Tax regime by retaining Rs 47,272 crore of the GST compensation cess.

The fund was specifically to compensate states for loss of revenue during the financial year of 2017-18 and 2019-19, The Indian Express reported on Friday, 25 September.

According to the GST Compensation Cess Act, the cess collected during a year is required to be credited to a “non-lapsable fund” which is part of the Public Account, and is meant to compensate states for loss of revenue, the report added.

This revelation comes at a time when Finance Minister Nirmala Sitharaman told Parliament that there was no provision in the law to compensate states for loss of GST revenue in the monsoon session last week.


The government instead of of transferring the entire GST cess amount to the GST compensation fund, retained these funds in the CFI and used it for other purposes, the CAG revealed.


Funds collected by the Centre as cesses for other specific purposes, such as the mineral trust, oil industry development and infrastructure, have also not been fully transferred to dedicated funds, the CAG said, while pointing out deficiencies in the collection, transfer and utilisation of these levies.


In the financial audit of the government accounts for the year 2018-19, tabled in Parliament on Wednesday, 23 September, the government auditor said the issue of short-transfer of cess collected in the CFI for their dedicated accounts has been a recurring problem for many years.

There was short transfer of Rs 1,64,322 crore to various Reserve Funds/Boards from 35 cesses that were levied in 2018-19. Though the government collected Rs 2,74,592 crore from cesses that year, more than Rs 1,00,000 crore got transferred to the CFI rather than being used for the intended purposes, the CAG noted.

In addition, Rs 1,24,399 crore, representing the cess on crude oil, collected in the last decade, had not been transferred to the designated Reserve Fund (the Oil Industry Development Board) and was retained in the CFI.

Other short transfers to designated reserve funds included Rs 2,123 crore in the case of the Universal Service Levy and Rs 79 crore in the case of the National Mineral Trust Levy, the CAG said.

(With inputs from The Indian Express, IANS)

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