GST is expected to give fillip to the economy and create a surplus in the States’ budget. But the economics behind the politics is insurmountable even for a Government that has been growing from strength to strength in its presence and aura. The GST (Compensation to States) Bill, 2017 is the compromise of sorts to show the source from where the Union will compensate the States for any loss of revenue. With the assurance that the money will come from this law to meet the compensation commitments, the States can now rest assured that as long as they are able to demonstrate loss of revenue on account of implementation of GST, they will get compensated. But who is to ‘pay for’ this Compensation. This article briefly surveys where the journey of compromise between the Centre and the States has reached and how it will impact the industries involved. know more for "Who ‘pays for’ the Compensation? GST Compensation to States Bill, 2017" form below...
Who ‘pays for’ the Compensation? GST Compensation to States Bill, 2017The preamble of the GST (Compensation to States) Bill, 2017 presupposes that loss of revenue will arise on account of implementation of GST pursuant to the 101st Amendment to the Constitution. Experience suggests that every tax reform has invariably brought windfall gains to the exchequer directly from the increased compliance and indirectly from the decreased cost of administration. Consensus building in order to proceed with implementation of GST demanded not merely assurance of compensation in the event of any loss but the clear roadmap to generate revenue and a formula for distribution of the compensation
GST (Compensation to States) Bill:
- Share of IGST and
- such other subsumed taxes
Payment of CompensationCompensation towards loss will be provisionally calculated and released on a bimonthly basis. It will be finalised based on revenue figures duly audited by CAG of India. Any shortfall in the provisional release will be made in the provisional release occurring next. Any excess in the provisional release will have to be returned back and credited to the Fund.
Levy of CessThis cess is levied under Section 8, on:
- Intra-State supplies in Section 9 of CGST Act
- Inter-State supplies in Section 5 of IGST Act
Exclusion from levy
Levy on imports
Rates of CessCentral Government to notify the effective rate of cess not exceeding the given rates on articles specified in the schedule, namely:
|Pan Masala||135% ad valorem|
|Aerated waters||15% ad valorem|
|Passenger cars (<10 pax.)||15% ad valorem|
|Any other supplies||15% ad valorem|
Cess on services
Issues for ConsiderationEntries in schedule
- input tax credit
- short levy
- offences and
- 50% to the Consolidated Fund of India
- 50% to the States in proportion to revenues in the last transition year.