CAG points out irregularities in process of sharing GST revenue

The Comptroller and Auditor General (CAG) has pointed out irregularities in the way part of goods and services tax (GST) revenue was transferred to states in 2017-18. It said the devolution of Integrated GST (IGST), which is collected on the inter-state supply of goods and services and imports, to states did not happen according to provisions of the law.


The IGST law provides for the division of the IGST revenue between the Centre and states, which turns out to be nearly 50 per cent each. In addition, when the Centre's share gets accrued as its tax revenue, 42 per cent of it has to be transferred to states according to the recommendations of the 14th Finance Commission.


Budget documents show that there was unallocated IGST worth Rs 1.77 trillion at the end of 2017-18. The CAG,  in its report on the central government's finances for 2017-18, puts the transfer to states from the IGST account at Rs 68,000 crore. This comes out to be 38.5 per cent of the IGST remainder.


Though the CAG did not comment on the amount, the national auditor flagged the process with which it was transferred, saying it was in contravention of the law.


“(The) Government of India needs to account for its share correctly and devolution should take place from the Central share only. The remaining 50 per cent (of IGST) should be apportioned to the States as per the law,” stated the CAG report on the central government's finances for 2017-18.


“The IGST Act does not permit any devolution of IGST as such. It has provisions for its settlement to the Centre and states. Now whatever goes to the Centre should be devolved only according to finance commission provisions,” said a senior government source


The source said the IGST transfer to states was done “suo motu”.  In the previous years’ budget, the government had specifically said that the unallocated IGST would be shared among the Centre and states in an “equitable manner”.


In the report, the national auditor also said nearly Rs 94,000 crore collected towards funding higher education in the country was not utilised for the purpose.


Further, it said that various ministries and departments saved Rs 2.5 trillion on account of reduced expenditure. “Such savings not only indicated poor budgeting, (but) also implied unnecessary provisioning of resources through taxes and depriving resources to other deserving sectors of the economy,” the report said.


Major savings have been accounted in food distribution to the poor, transfers to states for disaster management, grants to rural local bodies, the Swachh Bharat Mission and urea subsidy.

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