QUESTION 12
GS3
15 marks
Explain the rationale behind the Goods and Services Tax (Compensation to States) Act of 2017. How has COVID-19 impacted the GST compensation fund and created new federal tensions?
WRITE IN
11 min
250 words
What the examiner wants
Explain why the GST Compensation Act was enacted and how COVID strained it and Centre–state relations.
ExplainMake clear how and why it happens: causes, process, and an example for each point.
Demand-wise check
- 1Rationale: states gave up taxes; guaranteed 14% annual growth over 2015–16 base for 5 years, funded by cess≈50 words
- 2COVID impact: cess collections fell, compensation shortfall (about ₹2.35 lakh crore in 2020–21)≈50 words
- 3Tension: Centre's borrowing options, states' demand; back-to-back loans eventually≈50 words
- 4Compensation ended June 2022; cess extended to 2026 for repayment≈50 words
Open in about 30 words and close in about 30.
Answer plan
RationaleMechanismCOVID shortfallTensionResolutionConclusion
Where marks usually go
- Missing the 14% growth guarantee
- No shortfall figure (about ₹2.35 lakh crore in 2020–21) or back-to-back loan route
Draw this
- Flow: cess → compensation fund → states
Value addition
- FactThe GST (Compensation to States) Act, 2017 guaranteed 14% annual revenue growth for five years from 2015–16 base.GST Compensation Act, 2017
- FactThe Centre borrowed ₹1.1 lakh crore in 2020–21 and passed it to states as back-to-back loans.Ministry of Finance
Mapped topper copies
Reviewed public-source references related to this PYQ. Same-syllabus references are labelled separately.
- Aniket Ranjan · AIR 48 · Page 26 ↗Same syllabus reference
- Mayank Purohit · AIR 33 · Page 3 ↗Same syllabus reference
- Shakti Dubey · AIR 1 · Page 23 ↗Same syllabus reference
- Mayank Purohit · AIR 33 · Page 13 ↗Same syllabus reference
Links open original public sources. MainsBuddy does not host these answer sheets.
Next: plan for one minute, write it in 11 minutes, then get it checked.