THE GOODS AND SERVICES TAX (COMPENSATION TO STATES) BILL, 2017 – AN OVERVIEW
By: – DR.MARIAPPAN GOVINDARAJAN
Goods and Services Tax – GST
Dated:- 5-4-2017
Constitution amendment
Section 18 of the Constitution (One Hundred and First Amendment) Act, 2016 provides that parliament shall, by law, on the recommendations 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 a period of five years.
Compensation to States
The Goods and Services Tax (Compensation to States) Bill, 2017 ('Bill' for short) provides for the following-
* to provide that the financial year 2015-16 shall be taken as the base year for calculating compensation amount payable to States;
* the revenue to be compensated shall consist of revenues from all taxes levied by the States which are to be subsumed under the GST, as audited by C&AG;
* to provide that the compensation shall be r
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on lapsable Fund known as the GST Compensation Fund in the Public Account and all amounts payable to the States as GST compensation shall be paid from GST Compensation Fund; and
* any residual amount left in the Compensation Fund after five year compensation period shall be shared equally between the Centre and the States.50% of the amount remaining unutilized in the GST Compensation Fund at the end of the transition period shall be transferred to the Consolidated Fund of India as the share of the Centre and the balances of 50% shall be distributed amongst the States and Union Territories in the ratio of their total revenues from the SGST or UGST, as the case may be, in the last year of the transition period.
Bill
The Bill has been introduced in the Lok Sabha. The Bill has 14 sections and one schedule. This Act extends to whole of India. The bill provides for-
* ascertaining the base year for calculation of compensation;
* calculation of base year revenue;
* projected revenue
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ng taxed, imposed which are subsumed into GST-
* VAT, sales tax, purchase tax,tax collected on works contract or any other tax levied by the concerned State under the erstwhile entry 54 of List II of VII Schedule to the Constitution;
* the CST;
* the entry tax, octroi,local body tax or any other tax levied by the concerned State under the erstwhile entry 52 of List II of the VII Schedule to the Constitution;
* the taxes on luxuries, including taxes on entertainments, amusements, betting and gambling or any other tax levied by the concerned State under the erstwhile entry 62 of List II of the VII Schedule to the constitution;
* the taxes on advertisement or any other tax levied by the concerned State under the erstwhile entry 55 of List II of the VII Schedule to the Constitution;
* the duties of excise on medicinal and toilet preparation levied by the Union but collected and retained by the concerned State Government under the erstwhile Article 268 of the Constitution;
* a
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erstwhile entry 54 of List II of VII Schedule to the Constitution prior to the Constitution (One Hundred and First Amendment) Act, 2016 on the sale or purchase of petroleum crude, High speed diesel, motor spirit, natural gas, aviation turbinefuel and alcoholic liquor for human consumption;
* tax levied under CST on the sale or purchase of petroleum crude, High speed diesel, motor spirit, natural gas, aviation turbinefuel and alcoholic liquor for human consumption;
* any cess imposed by the State Government on the sale or purchase of petroleum crude, High speed diesel, motor spirit, natural gas, aviation turbinefuel and alcoholic liquor for human consumption;
* the entertain tax levied by the State but collected by local bodies under any Act under the erstwhile entry 62 of List II of the VII Schedule to the Constitution, prior to coming into force of the provisions of Constitution (One Hundred and First Amendment) Act, 2016;
Projected revenue for any year
Section 6 provides that
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te tax collected by the State, net of refunds given by the State;
* the IGST apportioned to that State;
* any collection of taxes on account of the taxeslevied by the respective State under the Act, net of refunds of such taxes
as certified by the C&AG;
* the total compensation payable shall be the difference between the projected revenue and the actual revenue calculated by a State.
Section 7(4) provides the method for calculation of the loss of revenue at the end of every two months is as detailed below-
* the projected revenue that could have been earned by the State in absence of GST till the end of the relevant two months shall be calculated on a pro-rata basis as a percentage of total projected revenue for any financial year during the transition period;
* the actual revenue collected by a State till the end of relevant two months period shall be-
* the actual revenue from State tax collected by the State, net of refunds given by the State;
* the IGST apportioned
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ovides for the levy of a cess on such intra-State supplies of goods or services or both and such inter-State supplies of goods or services or both as provided in Section 5 of IGST Act, for the purposes of providing compensation to the State for loss of revenue on implementation of GST with effect from the date from which the provisions of CGST Act is brought into force, for a period of 5 years or for such period as may be prescribed on the recommendation of the Council. Such levy is not there in case of composition levy under Section 10 of CGST.
The cess shall be levied as specified below, on the basis of value, quantity or on such basis at such rate not exceeding the rate as notified by the Central Government on recommendations of the GST Council-
Sl. No.
Description of supply of goods or services
Tariff item, heading, sub heading, Chapter or supply of goods or services, as the case may be
The maximum rate at which GST compensation cess may be collected
(1)
(2)
(3)
(4)
1
Pa
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pplies of goods or services or both. The cess on goods imported into India shall be levied and collected in accordance to Section 3 of the Customs Tariff Act, 1975 at the point when duties of customs are levied on a value determined under Customs Tariff Act, 1975.
Payments, returns and refunds
Section 9 provides that every taxable person shall-
* pay the amount of cess as payable under this Act in such manner;
* furnish such refunds in such forms, along with the returns to be filed under the CGST Act; and
* apply for refunds of such cess paid in such form
as may be prescribed.
Crediting proceeds of Cess to Fund
Section 10 provides that the proceeds of the cess shall be credited to a non lapsable fund known as the GST Compensation Fund, which shall form part of the public account of India. It shall be utilized for purposes specified in Section 8. All amounts payable to the States shall be paid out of the fund.
Distribution of balance amount
50% of the amount remaining unut
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the levy and collection of the cess on the intra-State supply of goods and services.
Applications of certain provisions of IGST Act
Section 11(2) provides that the provisions of IGST Act and the rules made there under, including those relating to assessment, input tax credit, non levy, short levy, interest, appeals, offences and penalties, shall, mutatis and mutandis apply in relation to the levy and collection of the cess on such inter-State supplies.
Input tax credit
The proviso to Section 11 provides that the input tax credit in respect of cess on supply of goods and services leviable shall be utilized only towards payment of said cess on supply of goods and services leviable.
Power to remove difficulties
Section 14 provides that if any difficulty arises in giving effect to the provisions of this Act, the Central Government may, on the recommendations of the Council, by order published in the Official Gazette, make such provisions, not inconsistent with the provisions of the A
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