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Centre used GST compensation cess elsewhere, violated law: CAG

-PTI/ The Hindu

The CAG findings run contrary to Finance Minister Nirmala Sitharaman’s submissions in Parliament last week that states could not be compensated for revenue shortfall from the Consolidated Fund of India (CFI) relying on an opinion from the Attorney General of India which stated that there was no such provision in the law.

The CAG has found that the Union government in the very first two years of the GST implementation wrongly retained 47,272 crore of GST compensation cess that was meant to be used specifically to compensate states for loss of revenue.

In its audit report of government accounts, the Comptroller and Auditor General (CAG) flagged that the amount was to be credited to the non-lapsable GST Compensation Cess collection fund for payment to states for loss of revenue due to implementation of GST since 2017, but the government did not do so, and thus violated the GST law.

“The GST Compensation Cess Act, 2017 provides for levy of 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,” CAG said.

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 states for loss of revenue.

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