Meaning
Definition
The GST Compensation Scheme (Goods and Services Tax Compensation Scheme) was an arrangement by the Indian government to compensate states for revenue loss due to the implementation of GST.How It Works
States’ revenue shortfall, calculated based on a 14% annual growth rate from the 2015-16 base year, was covered through a cess levied on certain goods and services. This cess was collected into a Compensation Fund.Key Objectives
Its primary goal was to ensure states didn’t face financial disadvantages during the transition to the new indirect tax regime, fostering cooperative federalism and smooth GST rollout.Author
