Lok Sabha Question No. 1877 (UNSTARRED), answered on 2017-12-29
Subject: Compensation of Cess under GST
Ministry: FINANCE
Asked by: OM BIRLA

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK SABHA

## UNSTARRED QUESTION NO. 1877 TO BE ANSWERED ON FRIDAY, THE 29th DECEMBER, 2017

## 8 PAUSHA, 1939 (SAKA)

## Compensation of Cess under GST

1877

SHRI OM BIRLA

Will the Minister of FINANCE be pleased to state:

- the details of estimated loss incurred by the various State Governments due to the implementation of the Goods and Services Tax (GST) by the Union
- (a) Governmnent;
- (b) whether the Compensation of Cess levied by the Union Government would be able to provide enough compensation to the States for recovery of their lost revenue: and if so, the details thereof;
- (c) the time by which the Union Government is planning for the continuance of the imposition of the Compensation of Cess; and
- (d) whether  there has been any negative impact on the manufacturing or consumption of the goods and services on which such Compensation of Cess has been imposed and if So, the details thereof?

## ANSWER

(SHRI SHIV PRATAP SHUKLA)

Reply (a) The Goods and Services Tax (Compensation to States) Act, 2017 was passed by the Parliament to provide for compensation to the States for the loss of revenue arisirg on account of implementation of the Goods and Services Tax (GST) in pursuance of the provisions of the Constitution (One Hundred and First For this purpose, financial year 2015-16 has been taken as the base year of calculating compensation amount payable to States and revenue to be compensated, consists of revenues from all taxes levied by the States which have been subsumed under GST, as audited by the Comptroller and Auditor General of India\_ The projected nominal growth rate of revenue subsumed for a state during the transition period shall be 14% per annum: On this basis, the revenue loss due to implementation of GST to the states for month of July to October has been

estimated Rs. 24,500 crore and the same amount has been released to the States as compensation to make up for the loss of revenue on bimonthly basis for month of July-August; 2017 and September-October, 2017 as per details given in Annexure:

- (b) Compensation cess collected has adequate to provide compensation to states for loss of revenue arising out of implementation of goods and services tax been
- (c) Section 18 of the Constitution (One Hundred and First Amendment) Act; 2016 provides that Parliament shall by law on the recommendation of the Goods and Service Taxes Council, provide for the compensation to the states for loss of revenue arising on the account of implementation of Goods & Services Tax for a period of five years.
- (d) On the recommendation of the GST Council, a cess is levied on specified demerit and luxury goods, like tobacco and tobacco products, pan masala, aerated waters, motor vehicles etc. over and above the peak GST rate of 28%. Since the rate of cess shall be such SO as to maintain the pre-GST tax incidence on such goods therefore there may not be much difference in total tax incidence (tax plus cess) ori these goods between the pre-GST and post-GST regime. being

## Details of GST Compensation released to States as on 31.11.2017

|     | Name of State/UT   | GST compensation released for July and Aug 2017 (Rs: in Crore)   | GST compensation released for and Oct 2017 (Rs. in Crore) Sep   | Total (Rs. In Crore)   |
|-----|--------------------|------------------------------------------------------------------|-----------------------------------------------------------------|------------------------|
| (1) | (2                 | (3)                                                              | (3)                                                             |                        |
| 1   | Andhra Pradesh     | 116                                                              | 266                                                             | 382                    |
| 2   | Arunachal Pradesh  | 15                                                               | 0                                                               | 15                     |
| 3   | Assam              | 338                                                              | 331                                                             | 669                    |
| 4   | Bihar              | 692                                                              | 1054                                                            | 1746                   |
| 5   | Chattisgarh        | 253                                                              | 562                                                             | 815                    |
| 6   | Delhi              | 115                                                              | 42                                                              | 157                    |
| 7   | Goa                | 68                                                               | 35                                                              | 103                    |
| 8   | Gujarat            | 1402                                                             | 880                                                             | 2282                   |
| 9   | Haryana            | 476                                                              | 325                                                             | 801                    |
| 10  | Himachal Pradesh   | 0                                                                | 0                                                               | 0                      |
| 11  | L& K               | 367                                                              | 314                                                             | 681                    |
| 12  | Jharkhand          | 313                                                              | 489                                                             | 802                    |
| 13  | Karnataka          | 1189                                                             | 2082                                                            | 3271                   |
|     | Kerala             | 810                                                              | 395                                                             | 1205                   |
| 15  | Madhya Pradesh     | 433                                                              | 908                                                             | 1341                   |
| 16  | Maharashtra        | 0                                                                | 834                                                             | 834                    |
| 17  | Manipur            | 24                                                               | 0                                                               | 24                     |
| 18  | Meghalaya          | 52                                                               | 38                                                              | 90                     |
| 19  | Mizoram            | 0                                                                | 0                                                               | 0                      |
| 20  | Nagaland           | 0                                                                | 0                                                               | 0                      |
| 21  | Odisha             | 333                                                              | 687                                                             | 1020                   |
| 22  | Puducherry         | 44                                                               | 122                                                             | 166                    |
| 23  | Punjab             | 1138                                                             | 960                                                             | 2098                   |
| 24  | Rajasthan          | 1205                                                             | 706                                                             | 1911                   |
| 25  | Sikkim             | 0                                                                | 0                                                               | 0                      |
| 26  | Tamil Nadu         | 530                                                              | 102                                                             | 632                    |
| 27  | Telangana          | 7                                                                | 162                                                             | 169                    |
| 28  | Tripura            | 31                                                               | 43                                                              | 74                     |
| 29  | Uttar Pradesh      | 190                                                              | 1330                                                            | 1520                   |
| 30  | Uttarakhand        | 223                                                              | 460                                                             | 683                    |
| 31  | West Bengal        | 441                                                              | 567                                                             | 1008                   |
|     | Total              | 10806                                                            | 13694                                                           | 24500                  |