The Comptroller and Auditor General (CAG) has come down on the utilisation of cess collections by the Centre. Also, it has questioned the utilisation of Integrated Goods and Services Tax (IGST) revenues.
According to the CAG’s report on the accounts of the government for 2018-19, tabled by Minister of State (Finance) Anurag Singh Thakur in both Houses of Parliament, the Centre collected over ₹2.74-lakh crore through 35 types of cesses during FY19.
Transfer to Reserve Funds
Under the rules, the collection first needs to be transferred to Reserve Funds and then used for the specific purposes as approved by Parliament. However, “only ₹1,64,322 crore was transferred to Reserve Funds/Boards and the rest was retained in the CFI (Consolidated Fund of India),” the report said.
Funds collected through Central taxes along with cesses and other levies go to the CFI. Here, taxes and surcharges are parked in a divisible pool and 42 percent of the total is given to States as devolution. The money collected via cesses is used by the Centre for specific purposes through dedicated funds of the administrative ministries.
A ‘Social Welfare Surcharge’ on Customs Duty, amounting to over ₹8,800 crore, was levied but a dedicated fund for the same was not envisaged, the report said.
“Non-creation, non-operation of Reserve Funds makes it difficult to ensure that cesses and levies are utilised for the specific purposes intended by Parliament,” it added.
The report highlighted that over ₹40,000 crore of GST Compensation Cess (levied on some goods falling under the 28 percent rate bracket) was not credited to the related Reserve Fund.
Similarly, ₹10,157 crore of the Road and Infrastructure Cess collected during FY19 was neither transferred to the related Reserve Fund nor used for the specific purpose.
In addition, over ₹1.24-lakh crore collected as cess on crude oil over the past decade was not been transferred to the Oil Industry Development Board, but was instead retained in the CFI. Other short transfers to designated Reserve Funds included ₹2,123 crore of the Universal Service Levy and ₹79 crore of the National Mineral Trust Levy.
Apportioning of IGST
On IGST, the report said over ₹15,000 crore was erroneously transferred and accounted as States’ share of net proceeds instead of being apportioned between the Centre and States.
In addition, a balance of ₹13,944 crore was left unapportioned under the head and retained in the CFI, even though the amended IGST Act now provides for ad hoc apportionment of the revenue. “As a result, States received overall less funds on account of IGST,” it said.