In the compensation fund created under Goods and Services Tax (GST), the Centre will have a greater share of the residual amount at the end of the five-year period. The GST Bill now provides for equal sharing of the amount in the compensation fund against the earlier formula that favored states.
According to the Goods and Services Tax (Compensation to States) Bill, states will receive provisional compensation bi-monthly from the Centre for the loss of revenue after GST is rolled out. The GST compensation bill, in view of the provision of the draft, which was made public in November 2016, said that after the period of five years of compensation, any remaining balance in the compensation fund will be equally shared between the center and the states.
As per the earlier draft, any excess amount after the end of the five-year tenure in the GST Compensation Fund was to be divided between the Centre and states, under which 50 percent of the excess amount was to be devolved between the Centre and states according to a statute. The remaining 50 percent would have to be given to the states in the ratio of their total revenues from SGST in the last year of the transition period. The GST Council, comprising Union finance minister and state representatives, had decided to set up a compensation fund by levying cess on demerit and luxury goods.