Finance Ministry disagrees with CAG’s GST cess observation, denies allegations of diversion of funds

Days after a CAG report rapped Modi government for short-crediting Rs 47,272 crore of compensation due to states, the Ministry of Finance has denied allegations of diversion of funds, saying the time taken in the reconciliation of compensation receipts cannot be termed as “diversion”.

According to the ministry, the dues to states were fully released by the Centre 2017-18 and 2018-19. But the issue likely to snowball ahead of the next GST Council meeting on October 5 with Opposition-ruled states of West Bengal and Kerala already raising the pitch against the irregularities citing in the CAG report.

The finance ministry is of the view that temporary retention of GST compensation receipt in CFI pending reconciliation cannot be termed as ‘diversion’. The compensation due to the states for the two years were fully paid and the time taken in reconciliation of compensation receipts cannot be termed as diversion of GST cess fund.

The CAG in its latest report has said that the Centre received nearly Rs 2.75 lakh crore from 35 cesses and levies but put less than 60% to use in 2018-19, the rest were transferred to Consolidated Fund of India (CFI) and were used for meeting general government expenditures.

But, according to the ministry all amounts including taxes and cesses that are collected by the Centre get credited first to the CFI and only after that it is transferred to the any other fund through a budget head in the Union budget. “The government makes all efforts to transfer all amounts collected by the end of every financial year into the Fund by making necessary budget provisions."

Meanwhile, West Bengal Finance Minister Amit Mitra, reacting to the revelations in the CAG report, said “The Modi government has been caught red-handed by its own CAG for hiding Rs 47,272 crore from cess compensation fund meant for states. Slyly put into CFI. Violating GST Act. Why? To bluff us by overstating revenue collection and bluff global rating agencies by understating fiscal deficit. Shameful.”

"CAG Report confirms illegal diversion of undistributed GST by GOI - an issue that Council has discussed and has nearly resolved. But it totally exposes double standards of GOI. When going is good GOI misappropriate the surplus and wash the hands when a temporary deficit appears,” Kerala Finance Minister Thomas Isaac said in a tweet.

Many an Opposition states are expected to raise the issue in the next GST Council meet on October 5.