GST Compensation Cess Amendment Bill

The group of ministers (GoM) on GST compensation cess, under Minister of State for Finance Pankaj Chaudhary, on Wednesday discussed merger of compensation cess into GST. States suggested that during the transition of cess, once it is decided to merge with taxes no new goods should be added to the list of luxury, sin and demerit goods. States were of the view that since the compensation cess ends in March 2026, the only way to restructure it is to merge the levy with the taxes and bring about separate tax rates for the items on which cess is levied currently. "GST compensation cess is coming to an end. A discussion needed to be done on what will be the future of the cess. Every state has given their views. This was the first meeting," Minister of State for Finance Pankaj Chaudhary said. Should it continue as cess or be converted to tax and whether there would be changes in luxury, demerit and sin goods items, Chaudhary said, "Discussion is going on". The next meeting of the GoM on

The Group of Ministers on reworking the nomenclature for GST compensation cess is likely to be convened by Union Minister of State for Finance Pankaj Chaudhary and include members from states, an official has said. The official further said the Terms of Reference (ToR) and the members of the GoM are in the process of getting finalised. "The GoM will have to suggest how the cess collected on demerit and luxury goods will be apportioned between Centre and states and suggest the legal changes that would be required to enforce the change," the official said. The members of the Group of Ministers (GoM) on GST compensation cess are in the process of being decided. But, since the issue is with regard to cess, which is collected by the Centre, and its apportionment, the GoM would have a member from the Centre as well, the official explained. Generally, the senior-most member of the GoM is made its convenor. So, the Union Minister of State for Finance is likely to be the convenor of the GoM

There's no reason for the cess to be retained in its current form. That's because the cess rates themselves are monstrously complicated, varying not only in magnitude but also according to end-use

The GST Council will decide on the modalities for appropriating the revenue collected by levying compensation cess on luxury, sin and demerit goods beyond March 2026, the deadline to repay loans taken by Centre to compensate states for revenue loss during Covid, an official said. Compensation cess was initially brought in for 5 years to make good the revenue shortfall of states following implementation of the Goods and Services Tax (GST). The compensation cess expired in June 2022, but the amount collected through the levy is being used to repay the interest and principal of the Rs 2.69 lakh crore that the Centre had borrowed during Covid. The GST Council will now have to take a call on the issue of 'GST compensation cess' with regard to its name, and the modalities for its distribution among the states. The issue was raised by some states at the 52nd GST Council meeting on October 7. Chattisgarh Deputy Chief Minister T S Singh Deo said the issue was raised by Karnataka on ...

To review the feasibility of MRP-linked compensation cess rates

States have been concerned about increasing cases of Centre imposing cesses for garnering additional revenue

Since there is no precedent for a constitutional body to borrow, an alternative which has been discussed is for the Centre to borrow with the specific intention of making up the compensation shortfall

The tax rate was to increase to 25% from 15%