Fair distribution

• The 19th report of Parliament’s Public Accounts Committee (PAC) criticizes the Goods and Services Tax (GST) regime in India.
• The PAC notes a 2% drop in indirect tax revenue between FY18 and FY20, the first two years of GST before the COVID-19 pandemic.
• The non-auditing and non-finalisation of the States’ Compensation Fund for over six years is a significant issue.
• The Centre’s failure to furnish the Compensation Fund Account to the Comptroller and Auditor General (CAG) is a concern.
• The GST (Compensation to States) Act, 2017, mandated a Compensation Fund and promised a 14% annual revenue growth for five years.
• Many States have reported non-receipt of funds or serious delays, negatively impacting governance.
• The PAC criticizes the Finance Ministry’s audit approach as “lackadaisical”.
• The PAC recommends establishing a formal mechanism with the CAG for timely audits and updates on pending cases.
• The PAC also calls for a comprehensive review to develop a “GST 2.0”, likely to resonate with States demanding a greater share of GST revenues.