GST not to move through consolidated fund; tax collection under existing model

The state component of the goods and service tax (GST) will not move through the consolidated fund of India and the centre will share its tax collection from the tax with the states under the existing formula.

The government has circulated the amendments to the constitution bill before it is taken up by the Rajya Sabha on Wednesday.

The bill ensures complete protection revenue protection for the states as government seeks support of the regional parties such as TMC, Samajwadi Party, Janta Dal (U) and the BJD.

The amendments provide a firmer assurance that states will be compensated for full five years for any loss of revenue from the roll out of the GST.

"Money collected by state through levies will not be part of CFI (consolidated fund of India)," the amendment says while also elaborating on sharing of centre’s kitty.

"Distribution of tax collected by the centre according to the prescribed formulae," the amendment says.

On the issue of compensation the amendment says, "Firmness in providing compensation by using the word the parliament shall as opposed to the word parliament may," it says.

There is further change likely in this. The word ‘will’ is likely to be used in place of ‘shall’ to address TMC’s concerns.

On dispute resolution, the amendment says there will be a mechanism created by the GST council and lays down the situation when this mechanism will kick in.

"Deletion of 1% addtional tax," it says on the proposed inter-state levy.