Breaking down of Goods and Services Tax (GST)

The Goods and Services Tax (GST) was marked a major shift from the traditional production-linked tax to a consumption-based tax. The Centre and the states are in a tussle over delayed compensation payments under GST.

Daily Current Affairs Quiz 2020

Key-Point

As per the GST (Compensation to States) Act, 2017, states are guaranteed compensation for revenue loss on account of implementation of GST for a transition period of five years (2017-2022).

The compensation is calculated based on the difference between the current states’ GST revenue and the protected revenue after estimating an annualised 14% growth rate from the base year of 2015-16.

The high rate of 14%, which has got compounded since 2015-16, has been seen as delinked from economic realities.

Compensation payments to states started getting delayed since October last year as GST revenues started to slow down. The Covid-19 pandemic has widened the gap, with GST revenues declining 41% in the April-June quarter.