GST Council Decides To Extend Compensation Cess Till March 2026

Nirmala Sitharaman chaired the forty fifth GST Council assembly in Lucknow on Friday.

New Delhi: The Goods and Services Tax (GST) Council on Friday determined to increase compensation cess until March 2026 for repaying loans. "Detailed financial statements have been worked out, based on which we learn that cess will have to be collected till March 2026, purely to pay back loans taken between 2020-21 and 2021-22," Finance Minister Nirmala Sitharaman acknowledged whereas briefing media on the result of forty fifth GST Council assembly.

Compensation cess is given to the states to compensate for the income losses because of GST implementation for a interval of 5 years from 2017.

"It was decided at 43rd GST Council meeting that cess has to be collected beyond July 2023 for the specific purpose of repayment of loans taken. This cess collection has to go on till March 2026, based on the financial statements worked out now," the finance minister additional mentioned.

The state governments have been demanding the Centre to deal with the pending subject pertaining to compensation cess in addition to the pending compensation cost for final yr. Some states have wished the compensation interval to extend past 5 years however the Centre has remained silent on this key demand made by them.

The GST Council determined to arrange a Group of Ministers (GoM) to look at the difficulty of correction of inverted responsibility construction for main sectors; rationalize the charges and assessment exemptions from the standpoint of income augmentation, from GST.

It additionally determined to arrange a GoM to debate methods and technique of utilizing know-how to additional enhance compliance together with monitoring by means of improved e-way invoice methods, e-invoices, FASTag knowledge and strengthening the institutional mechanism for sharing of intelligence and coordinated enforcement actions by the Centre and the states.

"The expectations of the industry on issues of rate rationalisation, correction of inverted duty structure seem to have been prioritised by the Council in today's meeting, with proposals to change the rates for specific goods and services. The proposal to extend the period for levy of compensation cess till March 2026 does not come as a surprise to the industry, as it has been in discussions since last year," mentioned Shareen Gupta, Partner, J Sagar Associates.