In consideration with subsuming the indirect taxes across the country, the government will introduce the GST compensation bill in the upcoming winter session of Parliament beginning next week. The bill will be presented in the light of compensating the states for any revenue losses encountered by stated under the GST regime as promised by the government.
The GST compensation will cover the losses legally if the state’s revenue growth dips below 14 percent in the first five years of the GST roll out. 2015-16 will be considered as the base year while calculating the revenue of a state.
“The compensation law would have the taxes subsumed and the revenue forgone by each state on account of GST implementation. It will give details on how the Centre plans to raise funds for compensating the revenue loss,” an official said.
In order to bring a clear understanding between the center and the states, the legal process is being taken in order to avoid any chance of error in the near future. The winter session of the parliament will commence on November 16.
The draft GST Compensation Law will be finalized by the central government official by November 15 and shall be circulated among the states. The law will be discussed in the GST council meeting on November 24-25.
The official said the compensation bill will also reveal the amount of revenue raised from an item on levying cess and the process it is reimbursed to the states. It will also specify the surplus in the cess pool at the end of five years.
