CBEC releases revised GST Model Law and Draft Compensation Law

Sunil Kumar , Last updated: 28 November 2016  
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The CBEC today releases the revised Draft GST Model and Draft Compensation Law for compensation to the States for loss of revenue on account of GST implementation. In terms of Constitution 101st Amendment Act, 2016, the Centre would compensate the States of any revenue loss for the first five year after implementation of GST. The following are the key take away from the bill:

  1. The Compensation would be calculated taking FY 15-16 as a base year. The projected growth in States revenue would be 14 percent. The projected revenue would be calculated on compounding basis taking projected growth over the base year.
  2. The Compensation payable to the States would be the difference of actual revenue (SGST + apportioned IGST) and projected revenue.
  3. The Compensation would be calculated and released provisionally on quarterly basis and final on calculated on yearly basis.
  4. To fund this compensation, there would be a levy of GST compensation cess on specified goods recommended by the GST council. However, no cess would be levied on assessees opting for composition scheme.
  5. The Input tax credit of GST compensation cess would be available and it can be utilised only for the payment of output GST Compensation cess.
  6. The amount of cess charged would be credited to GST Compensation Fund. The fund would be used to make payment of compensation to the States.
  7. The treatment of amount which remains in the GST compensation fund at the end of fifth year would be as under:

  • Fifty percent of the amount would be transferred to consolidated fund of India, which would be subject to distribution as per constitution
  • Remaining fifty percent would be distributed amongst the States in the ratio of their revenue of last fifth year.

The upcoming GST Council meeting would be very relevant to maintain the pace of GST, as the both the bills are to be considered for the discussion.


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Sunil Kumar
(Indirect Taxation )
Category GST   Report

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