The 19th report of Parliament’s Public Accounts Committee (PAC) criticizes the GST regime for failing to achieve its goals of simplifying and unifying indirect tax compliance.
Indirect tax revenue dropped nearly 2% between FY18 and FY20, the first two years of GST implementation.
A major issue is the non-auditing and non-finalisation of the States’ Compensation Fund for over six years, affecting the unified federal tax structure.
The Centre failed to provide the Compensation Fund Account to the Comptroller and Auditor General (CAG), delaying compensation to States for revenue losses.
Revenue-generating States are unhappy with GST’s centralizing tendencies, which have reduced their fiscal autonomy and tax collections.
The GST (Compensation to States) Act, 2017 promised a 14% annual revenue growth for States (2017–22), but many report delays or non-receipt of funds.
The PAC cites 2,447 inconsistencies worth ₹32,577.73 crore and criticizes the Finance Ministry’s “lackadaisical” audit approach.
The PAC recommends a formal mechanism with the CAG for timely audits and a comprehensive review to develop a “GST 2.0.”
States are pushing for a greater share of GST revenues, seeking 70%–80% instead of the current 50%.
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