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GST Compensation to states - Coggle Diagram
GST Compensation to states
Intro
CI
CG compensates states bi-monthly
because lost power to levy taxes such as VAT
CG is Constit bound to
for 5 years
growth rate of 14%- base year of 2015-16
Comp State for loss of revenue
Prior to GST
States exporting goods
to other states collected tax
GST
destination-based tax
e.g.
States where the goods
are sold receive the tax
Manufacturing States lose tax
consuming states would benefit
MB
BP/GE/IS
Paid out to States
Cess levied on Luxury and Sin goods
to pay compen to states
Challenges
Last year GST levy declined
demand-led slowdown
stopped released comp bi-monthly
economic contraction
further enlarge the gap and shrink
revenue shortfall due to the pandemic
people
curbing discretionary
spending on luxury goods
to fulfill its commitment
Govt may resort to market borrowing
Comp states for losses due to GST
GS
Modalities of the compensation (Comp) cess
by GST Comp to States Act, 2017
Comp Cess fund created
to pay States shortfall
GST council recommended
Act State that
Cess Collected
would be credited to the fund
Con
GI
GST subsumed
several taxes of States
amendment to constitution of India
Centre Borrow
behalf of cess fund
Tenure
Cess could be extended
beyond 5 years
until cess collected
sufficient to payoff
debt and interest on it
DOP
Indirect tax levied
nominal value
transaction
result
sig shortfall
States from assured tax collection