New Delhi: The government has extended the time for levying tax. GST Compensation cess for about 4 years till 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 cess was to end on June 30, but the chairmanship of the GST Council union finance Minister Nirmala Sitharaman and involving FMs of the state, decided to extend it till March 2026 to repay the loans taken in the last two financial years to meet the shortfall in its revenue collection.
After the 45th meeting of the GST Council in Lucknow in September last year, Sitharaman had said that arrangements for paying compensation to states for shortfall in revenue resulting from incorporation of their taxes such as tub In the uniform national tax GST, will be abolished in June 2022.
However, the compensation cess to be levied on luxury and demerit items to repay loans 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 sanctioned Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 as back-to-back loans to meet a share. issued in. Regarding shortfall in cess collection.
The Center has paid Rs 7,500 crore as interest cost for borrowing in 2021-22 and Rs 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 per cent, the cess collection did not grow in the same proportion and COVID-19 further widened the gap between protected revenue and actual revenue receipt, including 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 With the expansion of the compensation cess, products such as tobacco, cigarettes, hookah, aerated water, high-end motorcycles, aircraft, yachts and motor vehicles will continue to be loaded with higher tax rates.
Deloitte India Partner M s manik “The extension of the levy of the Compensation Cess, though expected, will continue to burden the affected businesses, especially sectors such as automotive, which need to be encouraged as it is one of the sectors that have a multiplier effect on GDP. and employment.”
Abhishek Jain, Partner, Indirect Taxes, KPMG in India, said, “The issue of whether states will be compensated over 5 years may eventually be decided in the upcoming GST Council meeting.”
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 cess was to end on June 30, but the chairmanship of the GST Council union finance Minister Nirmala Sitharaman and involving FMs of the state, decided to extend it till March 2026 to repay the loans taken in the last two financial years to meet the shortfall in its revenue collection.
After the 45th meeting of the GST Council in Lucknow in September last year, Sitharaman had said that arrangements for paying compensation to states for shortfall in revenue resulting from incorporation of their taxes such as tub In the uniform national tax GST, will be abolished in June 2022.
However, the compensation cess to be levied on luxury and demerit items to repay loans 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 sanctioned Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 as back-to-back loans to meet a share. issued in. Regarding shortfall in cess collection.
The Center has paid Rs 7,500 crore as interest cost for borrowing in 2021-22 and Rs 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 per cent, the cess collection did not grow in the same proportion and COVID-19 further widened the gap between protected revenue and actual revenue receipt, including 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 With the expansion of the compensation cess, products such as tobacco, cigarettes, hookah, aerated water, high-end motorcycles, aircraft, yachts and motor vehicles will continue to be loaded with higher tax rates.
Deloitte India Partner M s manik “The extension of the levy of the Compensation Cess, though expected, will continue to burden the affected businesses, especially sectors such as automotive, which need to be encouraged as it is one of the sectors that have a multiplier effect on GDP. and employment.”
Abhishek Jain, Partner, Indirect Taxes, KPMG in India, said, “The issue of whether states will be compensated over 5 years may eventually be decided in the upcoming GST Council meeting.”