Chapter 10 GST Compensation to States – CS Professional Advance Tax Law Notes is designed strictly as per the latest syllabus and exam pattern.
GST Compensation to States – CS Professional Advance Tax Law Study Material
Question 1.
Answer the following with reference to GST (compensation to states) Act, 2017:
(i) Projected Growth Rate
(ii) Base year
(iii) Projected Revenue for any year
(iv) Calculation and release of compensation
(v) Objective of GST (Compensation to States) Act, 2017 (June 2016, 1 mark each = 5 marks)
Answer:
(i) Projected Growth Rate
The projected nominal growth rate of revenue subsumed for a State during the transition period shall be fourteen percent (14%) per annum.
(ii) Base Year
For the purpose of calculating the compensation amount payable in any financial year during the transition period, the financial year ending 31st March, 2016 shall be taken as the base year.
(iii) Projected Revenue for any year
The projected revenue for any year in a State shall be calculated by applying the projected growth rate over the base year revenue of that State.
Illustration: If the base year revenue for 2015 -16 for a concerned State, calculated as per Section 5 is one hundred rupees, then the projected revenue for financial year 2018 -19 shall be as follows : Projected Revenue for 2018 -19 = 100 (1 + 14 /100)3.
(iv) Calculation and release of compensation
The compensation payable to a state has to be provisionally calculated and released at the end of every two months, which shall be finally calculator’ for every financial year after the receipt of final revenue figures, as audited by Comptroller and Auditor General of India.
(v) Objective
The objective behind providing compensation to the states is for the loss of revenue arising on account of implementation of the Goods and Services Tax (GST) in pursuance of the provisions of the Constitution (One Hundred and First Amendment) Act, 2016.
Question 2.
Write a short note on “zero rated supply”
Answer:
’’Zero Rated Supply” means any of the following supplies of goods or services or both, namely:-
- export of goods or services or both; or
- supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
Question 3.
Write a short note on “Compensation Cess”
Answer:
The compensation cess on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975, at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962, on a value determined under the Customs Tariff Act, 1975.
Compensation Cess will not be charged on goods exported by an exporter under bond and the exporter will be eligible for refund of input tax credit of Compensation Cess relating to goods exported. Compensation cess shall not be leviable on supplies made by a taxable person who has decided to opt for composition levy.
Question 4.
What is Goods and Services Tax (Compensation to States) Act, 2017?
Answer:
1. Objective of this Act is to provide for compensation to the States for the loss of revenue arising on account of implementation of the goods and services tax in pursuance of the provisions of the Constitution (One Hundred and First Amendment) Act, 2016, for next five years.
2. As per Section 1 this Act extends to the whole of India and it shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. Exercising its power Central Govt, notified 1st July, 2017 as the date on which all the provisions this Act shall come into force. [Cess notification 1/2017 dated 28-06-2017]
Question 5.
What is the structure of the Goods and Services Tax (Compensation to States) Act, 2017?
Answer:
The entire contents of this Act can be divided into three parts for better understanding the provisions of this Act:
- One part of this Act deals with “Compensation to be paid to the States for loss of Revenue because of implementation of GST. [Section 3, 4, 5, 6, 7 of this Act]
- Second part of this Act deals with ‘Cess to be levied on Certain Goods/Services for the purpose of collecting fund for arranging the amount of compensation to be paid to States. (Section 8, 9 and 11 of this Act and Schedule to this Act)
- Another part of this Act deals with ‘Goods and Services Tax Compensation Fund and other incidental provisions and power to make rules. [Section 10, 12, 13 14 of this Act]
GST Compensation to States Notes
“Cess”
For the purpose of GST MCess means a compensation cess that will be levied on certain goods and services under section 8 of the GST (Compensation to States) Act, 2017. It means under GST, in addition to tax on supply (which are CGST + SGST/UTGST on intrastate supplies and IGST on interstate supplies); a GST Cess ¡s also to be levied on supply of certain goods and Services.
Projected Revenue
Section 6 Provides that The projected revenue for any year in a State shall be calculated by applying the projected growth rate over the base year revenue of that State.
Projected Growth Rate
‘Section 3 Provides that the projected nominal growth rate of revenue subsumed for a State during the transition period shall be fourteen percent (14%) per annum.
Base Year
Section 4 provides that for the purpose of calculating the compensation amount payable in any financial year during the transition period, the financial year ending 31st March, 2016, shall be taken as the base year. Thus Base year for this purpose is 2015-16.
Base Year Revenue
This is a very important term because Projected Revenue depends on it and projected revenue is going to be a base for calculating compensation to States.
The base year revenue for a State shall be the sum of the revenue collected by the State and the local bodies during the base year, on account of the taxes levied by the respective State or Union and net of refunds, with respect to the prescribed taxes, imposed by the respective State or Union. which are subsumed into goods and services tax.