Kerala FM Thomas Issac fires fresh salvo on Centre over IGST issue

After the GST cess fund issue, Kerala Finance Minister Thomas Issac, who went on record saying there will be no surrender in the GST compensation battle, has fired a fresh salvo on the Centre asking why did it not distribute IGST of Rs 13,944 crore in 2018-19.

“The Central Government counters that “temporary retention of GST Cess is not diversion.” But what about accounting undistributed IGST, Rs 1,76,000 crore in 2017-18 & Rs 13944 crore in 2018-19, as the Centre’s revenue? Why was illegal practice continued in 2018-19 despite CAG remarks in the previous year?,” he said in a tweet.

As per law, IGST is collected by the Centre on inter-state trade and is shared between the Centre and states in the ratio of 50:50. In 2017-18, out of Rs 1,76,688 crore, only Rs 67,998 crore was distributed to the states based on devolution formula of IGST.

The CAG’s report last year had rapped the government for being inconsistent with the devolution of IGST in 2017-18. Despite that, the fresh report this year found Rs 15,001 crore was “erroneously transferred and accounted” as state’s share of net proceeds of IGST instead of being apportioned between the Centre and states.

In addition, a balance of Rs 13,944 crore was left un-apportioned and retained in Consolidated Fund of India, even though the amended IGST Act now provides for ad-hoc apportionment of IGST. As a result, states, overall, received less funds on account of IGST.

It is likely that more states will join hands before the October 5 GST Council meeting and put pressure on the Centre to come clean on GST devolution scheme. Opposition-ruled states have already shown their displeasure on the borrowing formula put forth by the Centre.

Isaac had earlier said, “The Centre should stop serving ultimatums to sates. The Centre government is only a member of the GST Council with 33.3% of votes. It is the Council that has constitutional powers to take decisions. Call the Council immediately. Stop issuing threats. India is still a federal country.”