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Finance Commission can look into GST compensation issue
September, 22nd 2014

The Finance Commission can be involved in the exercise of compensating states for revenue losses following implementation of the Goods and Services Tax (GST), said former Revenue Secretary Sumit Bose.

"The Finance Commission is well equipped to look at the compensation issue with regard to GST," he said here, adding that a new Commission could be constituted a bit early to decide on the compensation.

The government proposes to implement the Goods and Services Tax (GST) from April 1, 2016, and the new Finance Commission may be set up ahead of its schedule to look into the issues related with the new tax regime.

Finance Commission is constituted every five years to recommend devolution of taxes between Centre and states.

Bose, who is also a member of the Expenditure Management Commission, said that the "President if he so desires can set up a commission even earlier to produce a report in five years" to look into the GST compensation issues.

Lack of consensus on compensation to states on revenue loss has delayed implementation of GST. The GST aims at subsuming most of the indirect taxes at the central as well as state level.

The UPA government in 2011 introduced a Constitution Amendment Bill in the Lok Sabha to pave the way for introduction of GST.

As regards the compensation structure, the states have sought a five year compensation mechanism from the Centre and demanded the same be included in the Constitutional Amendment Bill.

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