The Cabinet on Friday approved replacing the Goods and Service Tax (Compensation to States) Ordinance by a bill, sources said. The GST (Compensation to States) Act 2017 aims to provide for compensation to the states for the loss of revenue arising on account of implementation of Goods and Service Tax Act, they said.

It provides for imposition of compensation cess on intra-state/ inter-state supplies of goods and services.

The GST Council in its 20th meeting held in August had recommended an increase of 10 per cent to 25 per cent in the maximum rate on certain type of motor vehicles.

The Ordinance was promulgated on September 2, thus raising the maximum rates.

Article 123 of the Constitution mandates that the ordinance be approved by the Parliament within six weeks of reconvening.

Accordingly, the sources added the finance ministry had sought Cabinet nod for the replacement of the ordinance by the Goods and Service Tax (Compensation to States) Bill, 2017.

The government has listed the bill for introduction in its Parliament business agenda for the next week.