Under Goods and Services Tax (GST) law, states are guaranteed compensation for revenue loss for 5 years, if their revenue does not increase 14% on the base year of 2015-16.The Centre will soon release another ₹ 35,000 crores to states to compensate for their revenue loss.
The ministry decided to transfer ₹35,000 crores from the consolidated fund of India (CFI) to compensation cess fund in 2 installments. The first payment of compensation for October to November, 2019. On top of the highest tax slab, a cess is levied on luxury and sin goods and the proceeds from the same is used to compensate states for any revenue loss.
Till now, The Centre has released about ₹2.11 lakh crores GST compensation to states since the implementation of GST on July 1, 2017.During July 2017 to March 2018 ₹ 48,785 crores was released, while between April 2018 to March 2019, ₹81,141 crores was paid to states. For April to May and June to July last year, ₹17,789 crores and ₹27,956 crores were released. Further, ₹35,298 crores was paid to states as compensation for August to September 2019.