The Goods and Services Tax (Compensation to States) Act, 2017

The economic growth of every country depends on the revenue collected through various modes by the government through proper legislation. In India taxes are levied on different goods and services throughout the states and Union territories. Though it is mandatory to levy taxes at certain circumstances the state or the government face loss on revenue during the implementation of the tax. In order to find a remedy for revenue loss the Government had brought in the enactment The Goods and services Tax (compensation to States) Act 2017 which came in to existence on 12 April 2017. The act is concise yet comprehensive in 14 sections and schedule.

Section 3, 4, 5 of the tax states the projected revenue growth, calculation of the compensation amount and base year revenue of a state. Section 3 gives the calculation of nominal growth rate of revenue during projected transitional period for a state is fixed at fourteen percent per annum and as per section 4 the base year for compensation calculation is fixed at 31st March 2016. Section five explains the base year revenue as the revenue or amount collected by the state and the local bodies. The exemption of collection of taxes for the compensation is also provided in section 5 where the sale and purchase of petroleum, crude oil, natural gas, aviation petrol, alcoholic liquor for human consumption and their taxes levied according to on previous entry 54 of list II of state list in the seventh schedule of constitution and as per the Central sales Tax act 1956, the entertainment taxes collected by state Government through local bodies in accordance with the 62nd entry list II of State in the Seventh schedule of the Constitution.

Section 6 details the calculation of the compensation of a base year based on the projected growth rate of the revenue on base year at 14%. Section 7 states the release of the compensation to the states after the concerned calculations on revenue figures after completing the audit by the comptroller and auditor General of India.

Any person who is paying tax on taxable goods and services are bound to pay the cess subject to the provisions of the Act for carrying out the purpose of the Act and such taxable persons are also eligible for refund on their returns as explained in section 9 of the act.

Section 12, 13 1nd 14 specifies the rule making power of the Central Government in consultation with the recommendation of the council to implement the provisions of the act, presenting such made rules before parliament and power of the Central Government to remove any difficulty to rules and provisions inconsistent to the act.

This Act is an important enactment on tax laws prevailing in the country as it requires stipulate and meticulous calculations on the tax levied on each financial period that proves to be both beneficial to states and also every taxable individual along with the assurance of growth of financial growth and economic stability of the country.

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