GST COMPENSATION - ECONOMY
News: T.N. seeks the release of ₹11,185 crore worth of pending compensation dues from the Central government
What's in the news?
● The
Tamil Nadu Government requested the Centre to release the pending compensation
of ₹11,185.82 crore due to the State, as it was expecting a revenue shortfall.
● It also requested for extending the GST compensation period by at least two more years.
GST COMPENSATION CESS:
● GST
Compensation Cess is levied by the GST
Act 2017.
● The
object of levying this cess is to compensate the states for the loss of revenue
arising due to the implementation of GST on 1st July 2017 for a period of five years or such period as
recommended by the GST Council.
● Compensation
cess is levied over and above the amount of GST charged in relation to a
particular supply.
● The calculation is similar to that of GST i.e. the prescribed rate is applied to the transaction value given under section 15 of the CGST Act 2017 to arrive at the cess liability.
Compensation CESS Fund:
● The
GST Act states that the cess collected and the amount as may be recommended by
the GST Council would be credited to the fund.
● It is levied on inter and intra-state supply of notified goods such as aerated drinks, coal, tobacco, automobiles for 5 years.
Distributing GST compensation:
● The
compensation cess payable to states is calculated based on the methodology
specified in the GST (Compensation to States) Act, 2017.
● The
compensation fund so collected is released to the states every 2 months.
● Any
unused money from the compensation fund at the end of the transition period
shall be distributed between the states and the centre as per any applicable
formula.