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Still no clarity on amount for state compensation packages

Updated on: Jul 13th, 2021


4 min read

Post the tenth meeting of the GST council on February 18th, there was good news in the air – the council had approved the bill to compensate states for possible revenue loss in the five years following GST implementation. However, there is still a fair amount of speculation surrounding the amount that is to be doled out as compensation with the Center staying stubbornly mum on numbers.

West Bengal Finance Minister Amit Mitra has thrown around the figure of Rs. 55,000 crores at some of the press meetings, and given that he is the chairman of the Empowered Committee of Ministers on GST, it is a figure we can hold on to, for now. But the mystery of how this number was arrived at is still unsolved. Experts were waiting for the revenue deficit figures in Budget 2017 to shed some light on this, but sadly that has also not worked out.

Why is it so difficult to reach a number?

One of the reasons why it may be difficult to reach absolute numbers is because the government has not yet decided which products fall under which tax slabs. This decision will probably be taken in the council’s next meeting in March, and post that we may expect to hear more about the compensation packages.

Another challenge facing the government is the issue of finding funds for this compensation. Experts assume that these funds could come from cess levied on the goods and services under the highest tax bracket of 28% – a category that is expected to include luxury cars, aerated beverages, cigarettes, and pan masala. Clean energy cess may also be part of the fund raising scheme.

Getting GST-ready before July 1

The deadline for GST rollout has been fixed, and as a business  now is the time to take the first steps to becoming GST-ready. This way, when the change comes, you will not be caught off guard! So, what can you do to be prepared for GST? Glad you asked:

  1. Get your enrollment done on time. To read more about the enrollment process and its relevance, Click here.
  2. Plan your logistics and warehousing requirement carefully. To read our detailed guide on impact analysis on logistics and warehousing, Click here.
  3. Adopt such platforms, technologies which will enable your business to be GST-compliant. Click here to get all updates and access a pool of GST Calculators.

Want an expert to explain GST to you? Get one, right here!

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Quick Summary

The tenth GST council meeting received approval for compensating states for revenue loss post-GST. Uncertainty surrounds the total amount due to lack of clarity on product tax slabs. Amit Mitra suggests Rs. 55,000 crores compensation, but the calculation process remains undisclosed. Government may fund compensation through cess on luxury items. Businesses are advised to prepare for GST implementation by enrolling on time, planning logistics efficiently, and adopting GST-compliant technologies.

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