28th September 2022

Confidant Classes

Competitors' very first choice

Home | LAW | Compensation Cess Fund fiasco

Compensation Cess Fund fiasco

The CAG recently raised objections to the transfer of money from the Cess Compensation Fund to the Consolidated Fund of India, calling the transfer illegal. He showed how the central deficit could have been underestimated by the bad signing.

What are these controversial funds?

  • Under the GST law, the amount collected from the collection of fees during the year is credited to a non-cancellable fund called the GST Expense Compensation Fund.
  • It is part of the public account and is used to compensate the states in case of loss of income.
  • The Consolidated Fund of India is an account that includes income received by the government through tax or non-tax revenue and expenses incurred by it, excluding exceptional items.
  • Following the CAG’s findings, the Center clarified that it had transferred funds to the compensation fund and paid all costs through 2019-2020.

What are the problems with compensation?

  • The Comptroller and Auditor General of India said that transferring the surplus from the Compensation Fund to the Consolidated Fund was illegal.
  • The report comes at a time when the Center has reached consensus on the issue of GST compensation to states due to severe financial stress caused by the covid-19 pandemic and the corresponding closures.
  • According to the law, the central government had guaranteed 14% revenue growth to the states and cover any budget deficits resulting from the implementation of the GST by collecting compensation.

Can the government transfer the surplus from the compensation process?

  • Legally, the Center cannot transfer funds that exceed the compensation fee. The observations made by the CAG were well recognized by the government.
  • For example, in fiscal year 20, total tax revenue was ₹ 95,444 crore, while ₹ 1,65,302 crore was delivered to the states. The Center then transferred the balance of Rs 69,858 million to the Cess Compensation Fund.

What about the fund’s surplus?

  • The current legal structure requires that any surplus from the initial fund be kept in the fund for future deficits. In other words, the background cannot be used by the government for any other purpose, but only for the purpose of providing compensation to States.
  • However, this needs to be reexamined, even more so in the post-covid phase. The current solution to the GST compensation problem was to allow states to borrow while using the right of compensation to bear the cost.

What does this mean for center-state relations?

  • This development will have implications for center-state relations, as several states have raised objections regarding the transfer of surpluses to the consolidated fund.
  • The key issue would be to restore trust between the Center and States. The solution found on the issue of GST compensation due to foreclosure is a positive development as it illustrates the willingness of stakeholders to find solutions. Therefore, cooperative federalism will remain the key in the future.
AILET 2023 Application Process Begins

AILET 2023 Application Process Begins

National Law University-Delhi NLU-Delhi will hold the AILET 2023 exam on December 11, 11:00 a.m. to 5:00 p.m. m. to…
Read More
All India Bar Examination 17 Syllabus and other details

All India Bar Examination 17 Syllabus and other details

AIBE 17 exam: Nearly one lakh candidates will take the AIBE exam this year, which will be held at 150…
Read More
AIBE 17 will take place in 3 months: BCI informs the Supreme Court

AIBE 17 will take place in 3 months: BCI informs the Supreme Court

Bar Council of India informed the Supreme Court that the syllabus for the upcoming All India Bar Examination 17 (AIBE17)…
Read More
Registration for CLAT 2023 will begin on August 8

Registration for CLAT 2023 will begin on August 8

CLAT 2023 will be held offline on December 18. Applicants can complete the online application form at consortiumofnlus.ac.in. CLAT 2023:…
Read More
AP LAWCET 2022 Results Declared

AP LAWCET 2022 Results Declared

Confidant-Classes-Judiciary AP LAWCET 2022 Results: Candidates who sat for the AP Common Entrance Test (AP LAWCET 2022) will now be…
Read More
Law graduates not practising since more than 5 years, must retake AIBE: BCI tells the Supreme Court

Law graduates not practising since more than 5 years, must retake AIBE: BCI tells the Supreme Court

The BCI has ruled that if a lawyer accepts a job not related to legal or judicial matters, then that…
Read More
Careers after Law

Careers after Law

Law has become the most common option in India at the moment. It has evolved and grown tremendously over time….
Read More
DU LLB Entrance Exam 2022 decoded

DU LLB Entrance Exam 2022 decoded

The University of Delhi will conduct the entrance exam of DU LLB 2O22 tentatively in next month. The university had…
Read More
UG-CLAT 2023 Exam Pattern

UG-CLAT 2023 Exam Pattern

The UG-CLAT 2023 would focus on the assessment of the candidates’ comprehension and reasoning abilities and skills. In general, it…
Read More
70-Year-Old Fortunate to Complete LLM | University of Delhi Centenary Chance Initiative

70-Year-Old Fortunate to Complete LLM | University of Delhi Centenary Chance Initiative

Under the University of Delhi’s Centenary Chance initiative, a 70-year-old man is given the chance to complete his LLM after…
Read More

About Post Author

error

Enjoy this? Please spread the word :)