Compensation to States for loss of revenue under GST

Posted on 10 June 2022 Category : GST terms

Meaning of Compensation to States for loss of revenue

The details about Compensation to States for loss of revenue are explained here.

Compensation to States for loss of revenue on account of introduction of goods and services tax

Parliament may, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for such period which may extend to five years.

Compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period which may extend to five years;

The loss of revenue at the end of every two months period in any year for a State during the transition period shall be calculated, at the end of the said period, in the following manner, namely:––

the projected revenue that could have been earned by the State in absence of the goods and services tax till the end of the relevant two months period of the respective financial year shall be calculated on a pro-rata basis as a percentage of the total projected revenue for any financial year during the transition period, calculated in accordance with section 6.
the actual revenue collected by a State till the end of relevant two months period in any financial year during the transition period shall be-

i. the actual revenue from State tax collected by the State, net of refunds given

ii. by the State under Chapters XI and XX of the State Goods and Services Tax Act;

iii. the integrated goods and services tax apportioned to that State, as certified by the Principal Chief Controller of Accounts of the Central Board of Excise and Customs; and

iv. any collection of taxes levied by the said State, under the Acts specified in sub- section (4) of section 5, net of refund of such taxes;

v. the provisional compensation payable to any State at the end of the relevant two-month period in any financial year shall be the difference between the projected revenue till the end of the relevant period in accordance with clause (a) and the actual revenue collected by a State in the said period as referred to in clause (b), reduced by the provisional compensation paid to a State till the end of the previous two months’ period in the said financial year during the transition period.

In case of any difference between the final compensation amount payable to a State calculated in accordance with the provisions of sub-section (3) upon receipt of the audited revenue figures from the Comptroller and Auditor-General of India, and the total provisional compensation amount released to a State in the said financial year in accordance with the provisions of sub-section (4), the same shall be adjusted against release of compensation to the State in the subsequent financial year.
Where no compensation is due to be released in any financial year, and in case any excess amount has been released to a State in the previous year, this amount shall be refunded by the State to the Central Government and such amount shall be credited to the Fund in such manner as may be prescribed.

This post describes about Compensation to States for loss of revenue. Comment below your thoughts about this post Compensation to States for loss of revenue.

Learn Exports Imports Free, Click here

Click here to know GST rate of your goods or service

4 types of Goods and Services in India for GST rate

Difference between IGST on International goods and IGST on domestic goods.

How is IGST calculated under Imports?

How is IGST rate on imports treated?

GST and e-Commerce Business, FAQ

Definition of E-Commerce under GST

TDS under GST, Frequently Asked Questions

Does Interest attract on GST Tax payment delay?

Mechanism of Payment of GST tax in India

Levy of late fee for GST Tax returns filing in India