GST panel reaches accord on compensation

The panel, headed by Finance Minister Arun Jaitley and includes representatives of all states, reached a consensus on the way states would be compensated for any loss of revenue from implementation of the new indirect tax regime from April 1, 2017. Base year for calculating the revenue of a state would be 2015-16 and secular growth rate of 14 per cent would be taken for calculating the likely revenue of each state in the first five years of implementation of GST, 

Jaitley told reporters. States getting lower revenue than this would be compensated by the Centre. The GST Council on the first day of its three-day meeting discussed five alternatives of GST rate structure, he said, adding no decision was taken and discussions would continue on Wednesday. Food items are proposed to be exempt from the tax and 50 per cent of the items of common usage will be exempt to keep the inflation under check. The lower rates would be levied on essential items and the highest for luxury and demerit goods. The cess would help create a compensation fund to help compensate states for any loss of revenue from implementation of the new indirect tax regime that will subsume a host of central and state taxes including excise duty, service tax and VAT.