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Temporary retention, not diversion: FinMin on CAG audit of GST cess

Time taken in reconciliation of compensation receipts can’t be termed as diversion of GST cess fund when the dues to states were fully released by the central government, they said

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Nirmala Sitharaman

Finance ministry sources have countered CAG audit finding of central government wrongly retaining Rs 47,272 crore of GST compensation cess meant for states, saying temporary retention cannot be termed as diversion.

Days after the Comptroller and Auditor General (CAG) flagged that the Centre in first two years of the GST implementation wrongly retained GST compensation cess that was meant to be used specifically to compensate states for loss of revenue, ministry sources said compensation due for the year 2017-18 and 2018-19 was fully paid to states.

Time taken in reconciliation of compensation receipts can’t be termed as diversion of GST cess fund when the dues to states were fully released by the central government, they said.

Sources said that in 2017-18, Rs 62,611 crore was collected, out of which the government released full compensation dues of Rs 41,146 crore to the states and union territories (UTs).

In 2018-19, an amount of Rs 95,081 crore was collected, out of which Rs 69,275 crore was paid as full compensation dues to states and UTs.

They said an amount of Rs 47,271 crore collected in the 2017-18 and 2018-19 had remained unutilised for reconciliation post full payment of GST compensation dues.

For the year 2019-20, the central government released Rs 1,65,302 crore as GST compensation against a cess collection of Rs 95,444 crore which it could do so with the unutilised cess of Rs 47,271 crore.

The GST (Compensation to States) Act guarantees all states an annual growth rate of 14 per cent in their GST revenue in the first five years of implementation of GST beginning July 2017. It was introduced as a relief for states for the loss of revenues arising from the implementation of GST.

If a state’s revenue grows slower than 14 per cent, it is supposed to be compensated by the Centre using the funds specifically collected as compensation cess. To provide these grants, a GST compensation cess is levied on certain luxury and sin goods.

The collected compensation cess flows into the consolidated fund of India (CFI), and is then transferred to the Public Account of India, where a GST compensation cess account has been created. States are compensated bi-monthly from the accumulated funds in this account.

However, instead of transferring the entire GST cess amount to the GST compensation fund during 2017-18 and 2018-19, the CAG found that the Centre retained these funds in the CFI and used it for other purposes.

The finance ministry sources said the compensation receipt in the CFI was subject to reconciliation in the coming months, as usual, in the forthcoming financial year.

If for that reason the amount remained in the CFI, how can that be treated as diversion, they asked adding even the CAG in its report has not said so.

The amount collected under compensation cess fund has been regularly and fully distributed to states as per their dues and budgetary provisions and by the end of July 2020, everything has been accounted for and released, source added.

The CAG in its report tabled in Parliament earlier this week said out of the Rs 62,612 crore GST Compensation Cess collected in 2017-18, Rs 56,146 crore was transferred to the non-lapsable fund.

In the following year (2018-19), Rs 54,275 crore out of Rs 95,081 crore collected was transferred to the fund.

The short transfer in 2017-18 was Rs 6,466 crore and in 2018-19 it was Rs 40,806 crore, the CAG said adding the Centre used this money for “other purposes” which “led to an overstatement of revenue receipts and understatement of fiscal deficit for the year”.

Sources explained that all amounts including taxes and cess that are collected by the Centre should, under the Article 266 of the Constitution, get credited first to the CFI and then only it could be transferred to any other fund through a budget head in 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, they said.

In case of compensation cess, since the final accounts of amounts collected are known only after the end of financial year, any amount collected over and above the estimate will remain in the CFI temporarily, they said adding after reconciliation, the amount is transferred to Compensation Fund and from that fund to states as per their compensation formula.

Therefore, such temporary retention of GST cess in CFI pending reconciliation cannot be treated as diversion by any stretch of imagination, sources said.

Since the cess collected by the Government has been used for full payment of due compensation, then it cannot be alleged that unutilizedcess amount has been diverted for other purposes, they insisted.

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Gold declines by Rs 95 on weak global trend

In the international market, gold was trading lower at USD 1,918 per ounce, while silver was quoting flat at USD 24.89 per ounce.

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New Delhi, Oct 22 : Gold prices fell Rs 95 to Rs 51,405 per 10 gram in the national capital on Thursday amid a weak global trend and rupee appreciation, according to HDFC Securities.

The precious metal had closed at Rs 51,500 per 10 gram in the previous trade.

Silver prices also declined Rs 504 to Rs 63,425 per kilogram from Rs 63,929 per kilogram in the previous trade.

“Spot gold prices for 24 carat in Delhi declined by Rs 95 on weak global prices and rupee appreciation,” HDFC Securities Senior Analyst (Commodities) Tapan Patel said.

The rupee appreciated by 4 paise to close at 73.54 against the US dollar on Thursday.

In the international market, gold was trading lower at USD 1,918 per ounce, while silver was quoting flat at USD 24.89 per ounce.

Navneet Damani, VP Commodities Research, Motilal Oswal Financial Services said, “Gold dipped after inching higher in the previous session amidst to and fro comments on the COVID-19 relief bill and some recovery witnessed in dollar.

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Economy not circus lion that responds to ringmaster’s stick: Chidambaram

Chidambaram said the economy was largely determined by the market, by the laws of demand and supply, and by the purchasing power and the sentiments of the people, which are missing currently

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P Chidambaram

Former Finance Minister P. Chidambaram on Thursday criticised the Centre for its claims on reviving the economy. He said the economy was largely determined by the market, by the laws of demand and supply, and by the purchasing power and the sentiments of the people, which are missing currently.

“Unless the government puts money in the hands of the bottom half of the families and puts food on the plates of the poor, the economy will not revive smartly,” he added.

The Congress leader said if the government doubted about what he say, then “just listen to the voices of the voters of Bihar on their existential crisis — no work or not enough work, no income or little income, and their thoughts are on surviving, not on spending.

He also said that RBI Governor, SEBI Chairman and the DEA Secretary should tell the FM, in unison, that the vast majority of the people do not have the money or the inclination to buy goods and services.

“Is it not intriguing that the RBI Governor, the SEBI Chairman and the DEA Secretary should speak on the same day on the same subject? All three have tried to ‘talk up’ the economy. I wish the economy was a circus lion that would respond to the stick of the ringmaster!” Chidambaram mocked.

The former Finance Minister was criticising the statements made by the RBI Governor and the Economic Affairs Secretary.

Reserve Bank of India (RBI) Governor Shaktikanta Das said on Wednesday that India is at the doorstep of a revival process from the ongoing pandemic.

Speaking at an event, he said that it is very important that the financial entities have adequate capital to support the growth. He noted that many of them have already raised capital while others are planning to do the same.

He said that after the pandemic is contained, the government will have to spell out a fiscal roadmap for the country.

Secretary, Economic Affairs, Tarun Bajaj on Wednesday said the Centre is open for further measures to boost the economy.

Participating at a CII event, he said that the government has received suggestions from various ministries and sectors on the needed measures.

Bajaj also said that while preparing the next Union Budget, the government would be looking at expenditure for this year and the requirements of various ministries.

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Elon Musk’s Tesla launches ‘Full Self Driving’ beta to select drivers

The customers in Tesla’s Early Access Programme will receive software updates, which will give drivers access to Autopilot’s ‘partially’ automated driver assistance system on city streets.

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elon musk

San Francisco: Tesla CEO Elon Musk has revealed the company has started rolling out its next-gen Full Self Driving (FSD) set of features to a limited number of expert and careful drivers.

The customers in Tesla’s Early Access Programme will receive software updates, which will give drivers access to Autopilot’s ‘partially’ automated driver assistance system on city streets.

The Early Access program serves as a testing platform to help fix software bugs.

More Tesla owners would get the update as the time passes, with the goal of a “wide release” by the end of the year.

“Regarding the Full Self-Driving beta release, the Autopilot team, again, is just a really all-star team. I spent a lot of time with the Autopilot team. And there’s a lot of really talented people in that team who have worked incredibly hard to make the — to get the beta release out,” Musk said during the company’s Q3 earnings call on Wednesday.

Musk has been talking about ‘Full Self Driving’ a lot in the past couple of years, calling it an investment in the future that will become far more valuable once fully autonomous cars get regulatory approval.

Earlier, he explained that with feature-complete FSD, the car will be able to drive without human intervention but it would still be supervised.

Tesla also rolled out the 2019.40.2 version of its software to some electric vehicle owners and this update includes features like Adjacent Lane Speed Adjustments and Stop Sign Detection that are required for FSD.

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