The Goods and Services Tax (Compensation to States) Act, 2017

THE SCHEDULE

[See section 8 (2)]

1. In this Schedule, reference to a “tariff item”, “heading”, “sub-heading” and “Chapter”, wherever
they occur, shall mean respectively a tariff item, heading, sub-heading and Chapter in the First Schedule
to the Customs Tariff Act, 1975 (51 of 1975).

2. The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975   (51 of 1975),
the section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as
may be, apply to the interpretation of this Schedule.

S. No.

Description of supply of goods or
services

Tariff item, heading,
sub-heading, Chapter, or
supply of goods or
services, as the case may
be

The maximum rate at
which goods and services
tax compensation cess
may be collected

(1) (2)        (3) (4)

1.  Pan Masala. 2106 90 20 1 [fifty-one per cent. of
retail sale price per unit]

2. Tobacco and manufactured tobacco
substitutes, including tobacco
products.

24 2[Four thousand one
hundred and seventy
rupees per thousand sticks
or two hundred and ninety
per cent. ad valorem or a
combination thereof, but
not exceeding four
thousand one hundred and
seventy rupees per
thousand sticks plus two
hundred and ninety per
cent. ad valorem or
hundred per cent. of retail
sale price per unit.]

3.  Coal, briquettes, ovoids and similar
solid fuels manufactured from coal,
lignite, whether or not agglomerated,
excluding jet, peat (including peat
litter), whether or not agglomerated.

2701, 2702 or 2703 Four hundred rupees per
tonne.

4.  Aerated waters.  2202 10 10 Fifteen per cent.
ad valorem.

3[4A. Motor vehicles for the transport of not
more than thirteen persons, including
the driver.

8702 10, 8702 20,8702 30
or 8702 90

Twenty-five per cent. ad
valorem.]

5. Motor cars and other motor vehicles
principally designed for the transport
of persons (other than motor vehicles
for the transport of ten or more
persons, including the driver),
including station wagons and racing
cars.

8703 4[Twenty-five per cent.
ad valorem.]

6.  Any other supplies.   Fifteen per cent.
ad valorem.

1. Subs. by Act 8 of 2023, s. 163, for “One hundred and thirty-five per cent. ad valorem” (w.e.f. 1-4-2023).

2. Subs. by s. 163, ibid., for certain words (w.e.f. 1-4-2023).

3. Ins. by Act 9 of 2018, s. 2 (w.e.f. 2-9-2017).

4. Subs. by s. 2, ibid., for “fifty per cent. ad valorem” (w.e.f. 2-9-2017).

1[Explanation.—For the purposes of this Schedule,—

(i) “retail sale price” means the maximum price at which the concerned goods in packaged form may

be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges,

commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and

the like and the price is the sole consideration for such sale:

Provided that where the provisions of the Legal Metrology Act, 2009 (1 of 2010) or the rules made

thereunder or any other law for the time being in force require to declare on the package, the retail sale

price excluding any taxes, local or otherwise, the retail sale price shall be construed accordingly;

(ii) where on the package of any concerned goods more than one retail sale price is declared, the

maximum of such retail sale price shall be deemed to be the retail sale price;

(iii) where the retail sale price, declared on the package of any concerned goods at the time of its

clearance from the place of manufacture, is altered to increase the retail sale price, such altered retail sale

price shall be deemed to be the retail sale price;

(iv) where different retail sale prices are declared on different packages for the sale of any concerned

goods in packaged form in different areas, each such retail sale price shall be the retail sale prices for the

purposes of determination of the rate of cess for the said goods intended to be sold in the area to which

the retail sale price relates.]

________

1. Ins. by Act 8 of 2023, s. 163 (w.e.f. 1-4-2023).

STATEMENT OF OBJECTS AND REASONS

The Goods and Services Tax (Compensation to States) Bill, 2017, provides for payment of compensation

to the States for loss of revenue arising on account of implementation of the goods and services tax for a

period of five years in accordance with the provisions of section 18 of the Constitution (One Hundred and

First Amendment) Act, 2016.

2. The Constitution (One Hundred and First Amendment) Act, 2016, has amended the Constitution to

facilitate the introduction of goods and services tax in the Country. The amendments made in the

Constitution confer simultaneous powers upon Parliament and the State Legislatures to make laws for

levy of goods and services tax on the supplies of goods or services or both. Section 18 of the Constitution

(One Hundred and First Amendment) Act, 2016, provides that, "Parliament shall, by law, on the

recommendations of the Goods and Services Tax Council, provide for compensation to the States for loss

of revenue arising on account of implementation of the goods and services tax for a period of five years.".

3. The Goods and Services Tax (Compensation to States) Bill, 2017, inter alia, provides for the

following, namely:—

(a) to provide that the financial year 2015-16 shall be taken as the base year for the purpose of

calculating compensation amount payable to States;

(b) the revenue to be compensated shall consist of revenues from all taxes levied by the States

which are now proposed to be subsumed under the goods and services tax, as audited by the

Comptroller and Auditor General of India;

(c) the projected nominal growth rate of revenue subsumed for a State during the transition period

shall be fourteen per cent. per annum;

(d) to provide that the compensation shall be released bi-monthly against the figures given by the

Central accounting authorities provisionally and final adjustment shall be done after getting audited

accounts of the year from the Comptroller and Auditor General of India;

(e) to provide that in case of the eleven Special category States referred to in article 279A of the

Constitution, the revenue foregone on account of exemption of taxes granted by States shall be

counted towards the definition of Revenue for the base year 2015-16;

(f) the revenues of States that were not credited to the Consolidated Fund of the States but were

directly devolved to "mandi" or "municipalities" would also be included in the definition of 'revenue

subsumed' if these were collected under the authority of entries 52, 54, 55 and 62 of List II of Seventh

Schedule of the Constitution and were subsumed in the goods and services tax;

(g) to generate resources to compensate States for five years for any loss of revenue suffered by

them on account of implementation of goods and services tax, a cess shall be levied on such goods, as

recommended by the Goods and Services Tax Council, over and above the goods and services tax on

that item;

(h) the proceeds of the goods and services tax compensation cess shall be credited to a non-lapsable

Fund known as the Goods and Services Tax Compensation Fund in the Public Account and all

amounts payable to the States as goods and services tax compensation shall be paid from the Goods

and Services Tax Compensation Fund; and

(i) any residual amount left in the Compensation Fund after five year compensation period shall be

shared equally between the Centre and the States.

Fifty per cent. of the amount remaining unutilised in the Goods and Services Tax Compensation Fund

at the end of the transition period shall be transferred to the Consolidated Fund of India as the share of the

Centre, and the balance fifty per cent. shall be distributed amongst the States and Union territories in the

ratio of their total revenues from the State goods and services tax or the Union territory goods and

services tax, as the case may be, in the last year of the transition period.

4. The Bill seeks to achieve the above objectives.