Reports by the Comptroller and Auditor-General state that a significant part of the cess that the Government charges has remained unutilised or been diverted. Clearly, the Government must reform the tax policy
While there has been an increasing demand to lower the tax rate, a question that has been lingering in the minds of many is, whether the projection of budget deficit, over the years, is real or not.
And now that we are preparing for yet another Budget that is scheduled to be presented in less than eight weeks, the Union Government needs to reform the tax policy and the rationale for levying cess.
At least the unspent Budget amount and monies realised through various cess, indicate that possibly, the Government is levying many taxes just for the heck of it. This additional cess is actually not required.
In December 2015, the Comptroller and Auditor-General pointed out that over three lakh crore rupees, collected through various forms of cess in 2014-2015, have either been diverted to other causes than stated or have simply remained unutilised. The total budget deficit for 2015-2016 is Rs3.94 lakh crore.
Similarly, in July 2015, the CAG found that various ministries, led by health, agriculture and human resource development, released a sum of about Rs44,000 crore over the past few years, without getting utilisation certificates or accounts of grants. These funds were given to statutory bodies and organisations, resulting in spending without any evidence of gains to the beneficiaries.
Similarly, the CAG has said that the central road fund that mobilises a road cess of two rupee on sale of every litre of petrol or diesel has not been utilised. The CAG’s audit of 94 public-private projects, funded through road cess since March 2012 has revealed that the National Highways Authority of India incurred a cost of Rs857 crore due to changes in the scope of 23 projects, most of which were due to deficiencies in detailed project reports.
The total project cost by developers also exceeded the number provided in the concession agreement, which increased the NHAI’s risk burden. The report estimated the higher project costs adopted by concessionaires amounted to Rs36,612 crore. The beneficiaries included certain high-profile private players.
According to the CAG, between 2002-2003 and 2014-2015, the telecom department collected a sum of Rs66,117 crore towards universal service obligation fund, but spent just Rs26,983 crore. This fund was set up to provide telephone connectivity and broadband services in the rural areas.
While state-owned telecom companies, Mahanagar Telephone Nigam limited and Bharat Sanchar Nigam limited failed to achieve the target, private providers achieved much of it without an additional financial support. This brings us to the fundamental question: Why was such a fund created at allIJ
Besides, a sum of Rs39,134 crore was not even transferred to the service obligation fund. The report says that this amount might have been diverted for other purposes. The CAG could not account for where this fund was diverted. This raises a moot question on the rationality of such a fund. Can the Government finances be collected and squandered at the whims of some officialsIJ By now it is clear that this levy on the people was uncalled for.
An education cess of three per cent, collected from every income tax payee, too has not met the objective, though it has been better utilised.
Scrutiny of the finance accounts (between 2004 and 2015) showed that as against the collection of Rs1,54,818 crore of primary education cess, only Rs1,41,520 crore was transferred for its use. The auditor has questioned the decision not to transfer the remaining Rs13,298 crore towards the purpose it was collected for.
The secondary and higher education cess was introduced in 2006-2007. The Government collected Rs64,000 crore between 2006 and 2015. Neither was any fund created for higher education nor was any scheme identified on which cost proceeds could be spent.
The CAG says there is no transparency in the utilisation of the fund for the commitment of furthering secondary and higher education. It expresses apprehension that the possibility of the diversion of funds for purposes not mandated under the Finance Act, cannot be ruled out.
This is a serious observation. If funds have been diverted, as is obvious, people have a right to know about it. It is a serious comment on the functioning of a Government and its way to collect funds without a purpose. The way funds are being diverted or under-utilised raises serious questions on the budgeting and accounting procedures.
Finally, all of this calls for a comprehensive review of the entire array of taxes and the different forms of cess. It only lends credence to the fact that Indians are not only the highest taxed but also the most irrationally extorted. The Government must have a serious re-think on cess and taxes.