Abolition of GST Compensation Cess: Concerns Over States’ Revenue & Fiscal Autonomy

With the recent restructuring of the Goods and Services Tax (GST), the abolition of the GST Compensation Cess has raised concerns regarding potential revenue losses for states and the erosion of their fiscal autonomy.

  • The GST compensation cess was introduced under the Goods and Services Tax (Compensation to States) Act, 2017. Its purpose was to guarantee state governments a fixed revenue growth rate for five years after the implementation of GST, compensating them for potential revenue losses from the subsuming of various indirect taxes—such as value-added tax (VAT), excise duty, and octroi—into GST.

Erosion of Fiscal Federalism: Issues in Tax ....

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