In order to compute the states’ revenues losses from the goods and services tax (GST), a 14% annual growth over the 2015-16 base would be assumed in their VAT revenue over the next five years, when the Centre will be obliged to fully compensate them for these losses. The broad contours of the compensation formula finalised here by the GST Council adds to the revenue base of the 11 geographically disadvantaged states what they forewent to run the area-based excise relief schemes, which cost them R19,000 crore in 2015-16, but not in case of other states.

Source - http://www.financialexpress.com