SYLLABUS SECTION: GS III (ECONOMY)
WHY IN THE NEWS?
- The Centre paid the entire amount of Goods and Services Tax (GST) compensation due to States up to May 31 by releasing an amount of ₹86,912 crore.
- The payment included a contribution from its own coffers beyond the ₹25,000 crore balance in the GST Compensation Fund.
- This was being done to assist States in managing their resources and ensuring that their programmes, especially entailing capital expenditure, could be implementing successfully during the financial year.
- As a result, the States were now only owe GST compensation for one month — June 2022. The
- States had been guaranteed a certain level of revenue for the first five years of the GST regime, which was introduce in 2017.
- This decision has been taken despite the fact that only about ₹25,000 crore is available in the GST Compensation Fund.
- The balance is being release by the Centre from its own resources pending collection of cesses. The Compensation Cess is levied over and above the peak 28% rate on luxury or ‘sin’ goods, including cars.
What is the GST compensation?
- 101 Amendment Act, 2016 was the law which created the mechanism for levying a common nationwide Goods and Services Tax (GST).
- The amendment inserted a new Article 279-A in the Constitution. This Article empowered the President to constitute a GST Council by an order. Accordingly, the President issued the order in 2016 and constituted the Council
- According to it states would receive the SGST (State GST) component of the GST, and a share of the IGST (integrated GST), it was agreed that revenue shortfalls arising from the transition to the new indirect taxes regime would be made good from a pooled GST Compensation Fund.
The Council is a joint forum of the centre and the states and consists of the following members:
(a) The Union Finance Minister as the Chairperson
(b) The Union Minister of State in charge of Revenue or Finance
(c) The Minister in charge of Finance or Taxation or any other
Minister nominated by each state government The members of the Council from the states have to choose one amongst themselves to be the Vice-Chairperson of the Council. They can also decide on his term. The Union Cabinet also decided to include the Chairperson of the Central Board of Excise and Customs (CBEC) as a permanent invitee (non-voting) to all proceedings of the Council.
Read more: UPSC CURRENT AFFAIRS
SOURCE: INDIAN EXPRESS