The levy of the cess was to expire on June 30, but the GST Council, headed by Union Finance Minister Nirmala Sitharaman and headed by the state finance minister, decided to extend it till March 2026 to repay loans taken in the last two financial years. Decrease in their revenue collection.
The levy of the cess was to expire on June 30, but the GST Council, headed by Union Finance Minister Nirmala Sitharaman and headed by the state finance minister, decided to extend it till March 2026 to repay loans taken in the last two financial years. Decrease in their revenue collection.
The government has extended the time period for levying the GST Compensation Cess by almost 4 years to March 31, 2026. As per the Goods and Services Tax (Period of Cess and Collection Period) Rules, 2022 notified by the Finance Ministry, the Compensation Cess will continue to be levied from July 1, 2022 to March 31, 2026.
The levy of the cess was to expire on June 30, but the GST Council, headed by Union Finance Minister Nirmala Sitharaman and headed by the state finance minister, decided to extend it till March 2026 to repay loans taken in the last two financial years. Decrease in their revenue collection.
After the 45th meeting of the GST Council in Lucknow in September last year, Ms Sitharaman had said that states should arrange to pay compensation for revenue shortfalls resulting from subsuming their taxes such as VAT into the uniform national tax GST in June 2022. will end.
However, the compensation cess to be levied on luxury and demerit items to repay the borrowings made in 2020-21 and 2021-22 to compensate states for GST revenue loss will continue to be collected till March 2026.
To meet the resource gap of the states due to low release of compensation, the Center has borrowed and raised ₹1.1 lakh crore in 2020-21 and ₹1.59 lakh crore in 2021-22 to meet a back-to-back share. Issued as bank loan. Regarding shortfall in cess collection.
The Center has repaid ₹7,500 crore as interest cost for borrowing in 2021-22 and ₹14,000 crore is to be paid in this financial year. Repayment of principal will start from 2023-24 and will continue till March 2026.
The Goods and Services Tax (GST) was implemented in the country with effect from July 1, 2017 and states were assured compensation for a period of five years for any loss of revenue due to the implementation of GST.
Though the protected revenue of the states has been growing at a compounded rate of 14%, the cess collection did not grow in the same proportion and the COVID-19 further widened the gap between the protected revenue and the actual revenue receipt, including a reduction in cess collection. The Center has released the full amount of GST compensation payable to the states till May 31, 2022.
AMRG & Associates Senior Partner Rajat Mohan said that with the extension of the compensation cess, products such as tobacco, cigarettes, hookah, aerated water, high-end motorcycles, aircraft, yachts and motor vehicles will continue to be charged with higher tax rates.
Deloitte India partner MS Mani said, “The expansion of the levy of compensation cess, though expected, will continue to burden the affected businesses, especially sectors like automotive, which need to be encouraged as it is one of the sectors that There is a multiplier effect on GDP and employment.” “The issue on whether states will be compensated over five years or not may eventually be decided in the upcoming GST Council meeting,” said Abhishek Jain, partner, indirect tax, KPMG in India.