2015-2016: Base year to calculate state revenue as per GST Council

Q.  The base year for calculating the revenue structure of the state according to the GST Council is:
- Published on 20 Oct 16

a. 2014-2015
b. 2015-2016
c. 2016-2017
d. 2017-2018

ANSWER: 2015-2016
 
The Goods and Services Council on 18th October 2016 reached a consensus on the way in which states would be compensated for loss of revenue with a four slab structure of 6, 12, 18 and 26 along with lower rates for essential items and highest band for luxury goods
  • Base year for calculating the revenue of the state would be 2015-2016
  • Secular growth rate of 14% would be taken for calculating the likely revenue of each state in the first 5 years of implementation of the GST
  • A consensus was reached on definition of revenue to compensate the state for revenue loss due to GST implementation
  • Rate structure should be such that it does not lead to further inflation and both States and Centre have adequate funds to discharge their duty.
  • The rate is to be revenue neutral so that there is no need to burden consumers with additional tax
  • To ensure inflation remains under control, food items along with other 50 percent items of common usage are proposed for tax exemption
  • Lower rates would be levied on essential items and the highest for luxury and demerit goods

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