Venue: Vigyan Bhavan, New Delhi

Summary of Points Finalized in the Meeting

Compensation Formula for States – Final Decision

The Council approved the formula for compensating States for revenue loss due to GST implementation.

It was agreed that States would be compensated for five years, assuming a projected revenue growth of 14% per annum over the base year 2015–16.

The compensation would be paid every two months on a provisional basis and finally adjusted annually after audit.

The base year revenue would include all taxes subsumed under GST such as VAT, CST, entry tax, purchase tax, etc., excluding entertainment tax levied by local bodies.
6th GST Council Meeting Minutes, pages 3–7

Compensation Fund and Source of Financing

A GST Compensation Fund would be created under the Public Account of India.

The Fund would be financed through a GST Compensation Cess levied on certain luxury and sin goods, such as:

Tobacco and tobacco products

Pan masala

Aerated drinks

Luxury cars

Coal and lignite

The proceeds of this cess would be non-lapsable and used solely for compensating States.

Any unutilised balance after five years would be shared equally between Centre and States.
6th GST Council Meeting Minutes, pages 7–9

Clarification on Base Year Revenue Components

The Council decided that State revenues from VAT on petroleum products would be included in the base year revenue for computing compensation, even though petroleum remained outside GST in the initial phase.

The same rule would apply to State excise on liquor for human consumption.

This was done to ensure States are not disadvantaged during the transition period.
6th GST Council Meeting Minutes, page 10

Frequency and Procedure for Compensation Payment

States would receive provisional compensation every two months, based on revenue data available from GSTN, and a final adjustment annually after verification.

This arrangement aimed to maintain cash flow stability for States during the transition period.
6th GST Council Meeting Minutes, page 9

Discussion on Model GST Law and IGST Law

The Law Committee was directed to expedite work on revising the draft Model GST Law and IGST Law based on the Council’s decisions from earlier meetings.

The revised drafts were to be presented for consideration in the next Council meeting.
6th GST Council Meeting Minutes, page 12

Cess Rate Flexibility and Product List

The Council agreed that the list of goods and cess rates would be reviewed periodically by the GST Council itself.

It was clarified that the cess would not apply to essential goods or mass-consumption items.
6th GST Council Meeting Minutes, page 8

Decision on Next Meeting Agenda

The next meeting was scheduled to finalise:

The Model GST Law (revised draft),

IGST Law, and

Compensation Law draft for approval and legal vetting.
6th GST Council Meeting Minutes, page 13 

 In summary:
The 6th GST Council Meeting (11 December 2016) finalised the compensation formula and fund structure for States, marking a key consensus milestone. The Council agreed on 14% annual growth compensation, five-year support, and funding through a GST Compensation Cess on luxury and sin goods. Preparations for finalising the Model GST and IGST laws were also advanced in this meeting.