Predicting Compensation under GST and its Impact on Revenue Growth Post Compensation Period: A Study for the State of West Bengal.

Parmar, Chandra Kant; Ghosh, Partha Pratim

Goods and Service Tax Compensation Cess (GSTCC) has been introduced to compensate states for any loss of revenue subsumed under GST considering 14% growth per year. This compensation shall last for 5 years i.e. up to 30.06.2022. GSTCC is levied on some specified luxury items or demerit goods. As GST is destination-based consumption tax, it is expected to increase revenue for states having a large consumption base. West Bengal, being, one of the largest consumer state, is expected to receive large revenue under GST. However, the state's budget figure shows huge increase in compensation amount over the year. With the help of trend function and simple regression model, the expected revenue from GST has been computed up to 30th June, 2022 and then compared with the projected revenue subsumed. The study shows an increasing trend of compensation for the state which indicates revenue shock once the compensation period shall over. This study also considers the theoretical impact of ongoing economic slowdown for pandemic on GSTCC. The study concludes that in post compensation period the state shall have revenue shock which may be mitigated by widening tax base and increasing tax efficiency.

WEST Bengal (India); VALUE-added tax; CONSUMPTION tax; OPTIMAL taxation; ECONOMIC shock

Vision: Journal of Indian Taxation, 2020, Vol 7, Issue 2, p34

2347-4475

Academic Journal

10.17492/jpi.vision.v7i2.722037