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

(1) This Act may be called the Goods and Services Tax(Compensation to States) Act, 2017. (2) It extends to the whole of India. (3) It shall come into force on such date1as the Central Government may, by notification in theOfficial Gazette, appoint.

(1) In this Act, unless the context otherwise requires, (a) “central tax” means the central goods and services tax levied and collected under the CentralGoods and Services Tax Act; (b) “Central Goods and Services Tax Act” means the Central Goods and Services Tax Act, 2017(12 of 2017); (c) “cess” means the goods and services tax compensation cess levied under section 8; (d) “compensation” means an amount, in the form of goods and services tax compensation, asdetermined under section 7; (e) “Council” means the Goods and Services Tax Council constituted under the provisions ofarticle 279A of the Constitution; (f) “Fund” means the Goods and Services Tax Compensation Fund referred to in section 10; (g) “input tax” in relation to a taxable person, means, –– (i) cess charged on any supply of goods or services or both made to him; (ii) cess charged on import of goods and includes the cess payable on reverse charge basis; (h) “Integrated Goods and Services Tax Act” means the Integrated Goods and Services TaxAct, 2017 (13 of 2017); (i) “integrated tax” means the integrated goods and services tax levied and collected under theIntegrated Goods and Services Tax Act; (j) “prescribed” means prescribed by rules made, on the recommendations of the Council, underthis Act; (k) “projected growth rate” means the rate of growth projected for the transition period as persection 3; (l) “Schedule” means the Schedule appended to this Act; (m) “State” means, –– (i) for the purposes of sections 3, 4, 5, 6 and 7 the States as defined under the Central Goodsand Services Tax Act; and (ii) for the purposes of sections 8, 9, 10, 11, 12, 13 and 14 the States as defined under the CentralGoods and Services Tax Act and the Union territories as defined under the Union Territories Goodsand Services Tax Act; (n) “State tax” means the State goods and services tax levied and collected under the respectiveState Goods and Services Tax Act; (o) “State Goods and Services Tax Act” means the law to be made by the State Legislature forlevy and collection of tax by the concerned State on supply of goods or services or both; (p) “taxable supply” means a supply of goods or services or both which is chargeable to the cessunder this Act; (q) “transition date” shall mean, in respect of any State, the date on which the State Goods andServices Tax Act of the concerned State comes into force; (r) “transition period” means a period of five years from the transition date; and (s) “Union Territories Goods and Services Tax Act” means the Union Territories Goods andServices Tax Act, 2017 (14 of 2017). (2) The words and expressions used and not defined in this Act but defined in the Central Goods andServices Tax Act and the Integrated Goods and Services Tax Act shall have the meanings respectivelyassigned to them in those Acts.

The projected nominal growth rate of revenue subsumed for a Stateduring the transition period shall be fourteen per cent. per annum.

For the purpose of calculating the compensation amount payable in any financial yearduring the transition period, the financial year ending 31st March, 2016, shall be taken as the base year.

(1) Subject to the provision of sub-sections (2), (3), (4), (5) and (6), the baseyear revenue for a State shall be the sum of the revenue collected by the State and the local bodies duringthe base year, on account of the taxes levied by the respective State or Union and net of refunds, withrespect to the following taxes, imposed by the respective State or Union, which are subsumed into goodsand services tax, namely: (a) the value added tax, sales tax, purchase tax, tax collected on works contract, or any other taxlevied by the concerned State under the erstwhile entry 54 of List-II (State List) of the SeventhSchedule to the Constitution; (b) the central sales tax levied under the Central Sales Tax Act, 1956 (74 of 1956); (c) the entry tax, octroi, local body tax or any other tax levied by the concerned State under theerstwhile entry 52 of List-II (State List) of the Seventh Schedule to the Constitution; (d) the taxes on luxuries, including taxes on entertainments, amusements, betting and gambling orany other tax levied by the concerned State under the erstwhile entry 62 of List-II (State List) of theSeventh Schedule to the Constitution; (e) the taxes on advertisement or any other tax levied by the concerned State under the erstwhileentry 55 of List-II (State List) of the Seventh Schedule to the Constitution; (f) the duties of excise on medicinal and toilet preparations levied by the Union but collected andretained by the concerned State Government under the erstwhile article 268 of the Constitution; (g) any cess or surcharge or fee leviable under entry 66 read with entries 52, 54, 55 and 62 ofList-II of the Seventh Schedule to the Constitution by the State Government under any Act notifiedunder sub-section (4), prior to the commencement of the provisions of the Constitution (One Hundred and First Amendment)Act, 20; Provided that the revenue collected during the base year in a State, net of refunds, under the followingtaxes shall not be included in the calculation of the base year revenue for that State, namely: -- (a) any taxes levied under any Act enacted under the erstwhile entry 54 of List-II (State List) of theSeventh Schedule to the Constitution, prior to the coming into force of the provisions of the Constitution(One Hundred and First Amendment) Act, 2016, on the sale or purchase of petroleum crude, high speeddiesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquorfor human consumption; (b) tax levied under the Central Sales Tax Act, 1956 (74 of 1956), on the sale or purchase ofpetroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviationturbine fuel and alcoholic liquor for human consumption; (c) any cess imposed by the State Government on the sale or purchase of petroleum crude, highspeed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel andalcoholic liquor for human consumption; and (d) the entertainment tax levied by the State but collected by local bodies, under any Act enactedunder the erstwhile entry 62 of List-II (State List) of the Seventh Schedule to the Constitution, priorto coming into force of the provisions of the Constitution (One Hundred and First Amendment) Act,2016. (2) In respect of the State of Jammu and Kashmir*, the base year revenue shall include the amount oftax collected on sale of services by the said State Government during the base year. (3) In respect of the States mentioned in sub-clause (g) of clause (4) of article 279A of the Constitution,the amount of revenue foregone on account of exemptions or remission given by the said StateGovernments to promote industrial investment in the State, with respect to such specific taxes referred to insub-section (1), shall be included in the total base year revenue of the State, subject to such conditions asmay be prescribed. (4) The Acts of the Central Government and State Governments under which the specific taxes arebeing subsumed into the goods and services tax shall be such as may be notified. (5) The base year revenue shall be calculated as per sub-sections (1), (2), (3) and (4) on the basis ofthe figures of revenue collected and net of refunds given in that year, as audited by the Comptroller andAuditor-General of India. (6) In respect of any State, if any part of revenues mentioned in sub-sections (1), (2), (3) and (4) arenot credited in the Consolidated Fund of the respective State, the same shall be included in the total baseyear revenue of the State, subject to such conditions as may be prescribed.