Consumer Welfare Fund under GST Section 57: Key to Consumer Protection in India

Section 57 of the CGST Act, 2017, establishes the Consumer Welfare Fund (CWF) as a key consumer protection mechanism under India’s Goods and Services Tax (GST) regime. Building on its earlier form under the Central Excise Act, the CWF channels unclaimed tax refunds and other prescribed funds into initiatives that promote consumer rights, awareness, and grievance redressal.

Administered by the Department of Consumer Affairs, the fund supports consumer education campaigns, legal aid, helplines, research, and state-level welfare funds. Governed by Rule 97 and overseen by a Standing Committee, the CWF ensures transparent and effective use of resources, reinforcing the government’s commitment to empowering consumers and fostering a strong consumer movement nationwide.

GST Section 57: The Consumer Welfare Fund – A Pillar of Consumer Protection

The Goods and Services Tax (GST) regime in India, implemented on July 1, 2017, brought with it a crucial mechanism for consumer protection: the Consumer Welfare Fund (CWF), constituted under Section 57 of the Central Goods and Services Tax (CGST) Act, 2017. This fund serves as a vital safeguard, ensuring that the benefits of indirect taxes ultimately reach the consumers and promoting a stronger consumer movement across the nation.

Genesis and Purpose of the Consumer Welfare Fund

The concept of a Consumer Welfare Fund is not new to India. It existed even before GST, under the erstwhile Central Excise and Salt Act, 1944. This earlier fund, established in 1991, aimed to credit amounts not refundable to manufacturers. With the advent of GST, the CWF was re-established under Section 57 of the CGST Act, 2017, and its operations are governed by Rule 97 of the CGST Rules, 2017, which subsumed the earlier Consumer Welfare Fund Rules of 1992.

The primary objective of the Consumer Welfare Fund is to promote and protect the welfare and interests of consumers in India. This encompasses:

• Creating consumer awareness: Educating consumers about their rights and responsibilities.
• Strengthening consumer movement: Supporting consumer organizations and initiatives.
• Ensuring benefits accrue to consumers: Channeling unclaimed refunds and excess tax benefits back to the public good.
• Funding consumer grievance redressal mechanisms: Supporting the National Consumer Helpline and other avenues for dispute resolution.

What Gets Credited to the Fund?

Section 57 explicitly outlines the sources of money credited to the Consumer Welfare Fund:

(a) The amount referred to in sub-section (5) of section 54: This is a significant source. Section 54 deals with refunds under GST. Specifically, sub-section (5) addresses situations where an amount of refund becomes due but cannot be paid to the applicant (e.g., due to the principle of “unjust enrichment” where the incidence of tax has been passed on to the consumer, or if the consumer details are unavailable). In such cases, this unclaimed amount is transferred to the Consumer Welfare Fund. It is important to note that if the refund amount is less than Rupees One Thousand, no refund is granted to the applicant or the Consumer Welfare Fund, and this limit applies to each tax head separately.

(b) Any income from investment of the amount credited to the Fund: The money held in the CWF is invested, and any income generated from these investments also flows back into the Fund, ensuring its sustainable growth.

(c) Such other monies received by it, in such manner as may be prescribed: This clause provides flexibility for the government to include other funds that may contribute to consumer welfare as and when deemed appropriate.

Administration and Utilization of the Fund

The Consumer Welfare Fund is managed by the Department of Consumer Affairs (Ministry of Consumer Affairs, Food & Public Distribution). While the fund is set up under the Department of Revenue (Ministry of Finance), its operation rests with the Department of Consumer Affairs.

Rule 97 of the CGST Rules, 2017, along with the Guidelines for administration of the Consumer Welfare Fund (which have been revised periodically, most recently in 2023), provides detailed guidance on the management and utilization of the CWF.

Key aspects of utilization include:

• Grants for Consumer Welfare Activities: Financial assistance is extended to various entities, including:
  • Central and State Governments/Government Bodies
  • Institutions of national repute (e.g., Universities)
  • Autonomous bodies
  • Voluntary Consumer Organizations (VCOs) registered under relevant laws (e.g., Companies Act, 2013), provided they have been engaged in consumer welfare activities for a specified period (typically 3 years).
• Specific Projects/Activities Funded: The CWF typically supports projects such as:
  • Creation of Consumer Law Chairs/Centres of Excellence: Fostering research and training on consumer-related issues in academic institutions.
  • Consumer Literacy and Awareness Programs: Spreading awareness through campaigns like “Jago Grahak Jago” via various media (print, electronic, outdoor, social media).
  • Establishment of State Consumer Welfare (Corpus) Funds: Providing seed money (up to Rs. 20.00 Crore) to States/UTs to establish their own funds, with a Centre-State contribution ratio of 75:25 (or 90:10 for Special Category States/UTs). The interest generated from these corpus funds is then used by the respective State/UT for consumer welfare activities.
  • Reimbursement of Legal Expenses: On a selective basis, grants may be provided to reimburse legal expenses incurred by complainants in consumer disputes after final adjudication.
  • Support for National Consumer Helpline (NCH): The CWF plays a role in sustaining helplines like the NCH (toll-free 1800-11-4000 or 1915) and zonal helplines for grievance redressal.
  • Bureau of Indian Standards (BIS) initiatives: Promoting standardization, certification, and quality consciousness among consumers and manufacturers.

Standing Committee for Fund Utilization

To ensure proper utilization of the money credited to the Fund, the Government constitutes a Standing Committee. This Committee, comprising a Chairman, Vice-Chairman, Member Secretary, and other members, makes recommendations for grants and investments. The Committee typically meets at least four times a year.

Powers of the Standing Committee include:

• Requiring applicants to register with specified authorities.
• Demanding production of books, accounts, and other relevant documents from applicants.
• Auditing applicant accounts to ensure proper utilization of grants.
• Requiring refund of sanctioned grants in case of default or suppression of material information.

Transparency and Accountability

The Government or the specified authority is mandated to maintain proper and separate accounts and relevant records for the Consumer Welfare Fund. An annual statement of accounts must be prepared in consultation with the Comptroller and Auditor-General of India, ensuring transparency and accountability in the fund’s operations.

FAQs on Consumer Welfare Fund

What is the Consumer Welfare Fund (CWF) under GST?
The Consumer Welfare Fund (CWF) is a fund established under Section 57 of the CGST Act, 2017, to promote and protect the welfare of consumers in India by utilizing unclaimed tax refunds and other prescribed sources.

When was the Consumer Welfare Fund under GST introduced?
The GST-based CWF was introduced on July 1, 2017, with the implementation of the GST regime in India.

Who administers the Consumer Welfare Fund?
The CWF is administered by the Department of Consumer Affairs under the Ministry of Consumer Affairs, Food & Public Distribution.

Who manages the fund’s finances?
The Department of Revenue, Ministry of Finance, manages the financial structure, while operational decisions are made by the Department of Consumer Affairs.

What are the main sources of money credited to the CWF?
Key sources include unclaimed GST refunds under Section 54(5), income from fund investments, and other prescribed contributions.

What is the significance of Section 54(5) in relation to the CWF?
Section 54(5) pertains to refund amounts that cannot be returned to taxpayers due to unjust enrichment or lack of claimant information. These funds are transferred to the CWF.

Is there a refund threshold for crediting the CWF?
Yes, refund amounts below ₹1,000 per tax head are not credited to the CWF or refunded to the applicant.

How are funds from the CWF utilized?
Funds support consumer education, grievance redressal, legal aid, campaigns, helplines, and academic/research projects.

Who can apply for grants from the Consumer Welfare Fund?
Eligible entities include government departments, national institutions, autonomous bodies, and registered voluntary consumer organizations (VCOs) with at least three years of activity.

What are some notable programs supported by the CWF?
Notable initiatives include the “Jago Grahak Jago” campaign, National Consumer Helpline, creation of Consumer Law Chairs, and State Consumer Welfare Corpus Funds.

Are State Governments involved in the Consumer Welfare Fund activities?
Yes, States/UTs can establish their own corpus funds with seed grants from the central CWF, following a 75:25 or 90:10 Centre-State contribution model.

What is the role of the Standing Committee in managing the CWF?
The Standing Committee recommends grant approvals, monitors fund usage, ensures compliance, and mandates audits for transparency.

How often does the Standing Committee meet?
The committee typically meets at least four times a year.

Can the CWF be used for reimbursing legal expenses?
Yes, it can selectively reimburse legal expenses of consumers after final adjudication of disputes.

Is there any oversight of the CWF’s financial operations?
Yes, an annual statement of accounts is prepared with the Comptroller and Auditor-General (CAG) of India to ensure transparency and accountability.

What legal framework governs the CWF besides Section 57?
Rule 97 of the CGST Rules, 2017, and periodically revised guidelines govern the administration and utilization of the CWF.

Can the CWF support academic institutions?
Yes, it funds research, training, and awareness projects related to consumer law and welfare in recognized academic and research institutions.

What is the role of the Bureau of Indian Standards (BIS) in the CWF framework?
The BIS receives support from the CWF for activities promoting quality standards, consumer awareness, and certification.

Are there guidelines for applying for a grant from the CWF?
Yes, detailed administrative guidelines outline the eligibility, documentation, and process for grant applications, revised as needed (most recently in 2023).

How does the fund contribute to consumer awareness?
It supports multimedia awareness campaigns, educational drives, and dissemination of consumer rights information across various platforms.

Can private companies access the CWF for projects?
No, only eligible government institutions, autonomous bodies, and recognized VCOs can access CWF grants, not for-profit private companies.

How does the CWF support grievance redressal?
It funds platforms like the National Consumer Helpline and zonal helplines that assist consumers with complaints and dispute resolution.

Is the fund utilized uniformly across all states?
Efforts are made for balanced utilization, including encouraging states to create their own corpus funds supported by central seed grants.

What is the minimum period of operation required for VCOs to be eligible?
Voluntary Consumer Organizations must typically be in active operation for at least three years to be eligible for CWF grants.

Can CWF funds be misused?
There are strict checks, including audits and conditions requiring refund of grants in cases of misuse or suppression of material facts.

GST Section 57, by establishing the Consumer Welfare Fund, underscores the government’s commitment to consumer protection and welfare. By pooling unclaimed tax refunds and other resources, the fund enables a range of initiatives aimed at empowering consumers, resolving grievances, and fostering a robust consumer movement across India. The effective functioning and strategic utilization of this fund are paramount to achieving the broader objectives of consumer rights in the GST era.