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GST cess falls 42% short
Why is it in news?
- The Centre made up a 42% shortfall in Goods and Services Tax compensation cess collection in 2019-20.
Details:
- During 2019-20, the cess collected was only ₹95,444 crore, just under 58% of the ₹65 lakh crore that was paid out to States.
- States had been protesting the delay in payment of pending compensation.
What is Compensation Cess?
- Compensation cess was introduced as relief for States for the loss of revenues arising from the implementation of GST.
- States were guaranteed a 14% tax revenue growth in the first five years after GST implementation by the Central government.
- States’ tax revenue as of FY16 is considered as the base year for the calculation of this 14% growth.
- Any shortfall against it is supposed to be compensated by the Centre using the funds specifically collected as compensation cess.
- Compensation cess is levied on five products considered to be ‘sin’ or luxury goods.