What is it?

• The GST regime, launched on July 1, 2017, introduced a uniform indirect tax structure across the country by merging various state and local-level levies.
• Under the GST compensation Act 2017, states are guaranteed full compensation for any revenue loss for the first five years after the introduction of the GST.
• For the purpose of calculating the compensation amount in any financial year, year 2015-16 will be assumed to be the base year, from which revenue will be projected. The growth rate of revenue for a state during the five-year period is assumed to be 14% per annum. 
• Any shortfall has to be compensated from the receipts of Compensation Cess levied on luxury goods and sin products such as liquor, cigarettes, aerated water, automobiles, coal and other tobacco commodities.

Why in News?

• Former West Bengal minister Amit Mitra has written to Union Finance Minister Nirmala Sitharaman, urging her to continue with the GST compensation to states for another 3-5 years after this month. The five year compensation period under the GST Act ends this month.

Reference

https://economictimes.indiatimes.com/news/india/extend-gst-compensation-to-states-for-next-3-5-yrs-amit-mitra-urges-sitharaman/articleshow/92196947.cms?from=mdr