Section 7(4) in Goods and Services Tax (Compensation to States) Act, 2017
(4)The loss of revenue at the end of every two months period in any year for a State during the transition period shall be calculated, at the end of the said period, in the following manner, namely : -(a)the projected revenue that could have been earned by the State in absence of the goods and services tax till the end of the relevant two months period of the respective financial year shall be calculated on a pro-rata basis as a percentage of the total projected revenue for any financial year during the transition period, calculated in accordance with section 6.Illustration. - If the projected revenue for any year calculated in accordance with section 6 is one hundred rupees, for calculating the projected revenue that could be earned till the end of the period of ten months for the purpose of this sub-section shall be 100x(5/6)=Rs.83.33;(b)the actual revenue collected by a State till the end of relevant two months period in any financial year during the transition period shall be-(i)the actual revenue from State tax collected by the State, net of refunds given by the State under Chapters XI and XX of the State Goods and Services Tax Act;(ii)the integrated goods and services tax apportioned to that State, as certified by the Principal Chief Controller of Accounts of the [Central Board of Indirect Taxes and Customs] [Substituted 'Central Board of Excise and Customs' by Act No. 34 of 2018, dated 29.8.2018.]; and(iii)any collection of taxes levied by the said State, under the Acts specified in sub-section (4) of section 5, net of refund of such taxes;(c)the provisional compensation payable to any State at the end of the relevant two months period in any financial year shall be the difference between the projected revenue till the end of the relevant period in accordance with clause (a) and the actual revenue collected by a State in the said period as referred to in clause (b), reduced by the provisional compensation paid to a State till the end of the previous two months period in the said financial year during the transition period.
