Incentivizing States Under GST Regime

As tax rates during Goods and Services Tax (GST) regime will be closely aligned to the Revenue Neutral Rates (RNR) of the Centre and the States, the revenues of the Central and State Governments will not be impacted in the long run. To help States in the transition phase, the Constitution (122nd Amendment) Bill, 2014, which was introduced in the Lok Sabha on 19.12.2014 for amending the Constitution to facilitate introduction of GST in the country provides for;
• Levy of an additional tax of goods, not exceeding one per cent in the course of inter-state trade or commerce to be collected by the Government of India for a period of two years, and assigned to the States from where the supply originates;
• Compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period which may extend to five years;
• In the case of petroleum and petroleum products, it has been provided that these goods shall not be subject to the levy of Goods and Services Tax till a date notified on the recommendation of the Goods and Service Tax Council.
This was stated by Shri Arun Jaitley, Union Finance Minister in written reply to a question in the Rajya Sabha.

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