The compensation cess, initially set to end in 2022, was extended to repay Rs 2.7 trillion in pandemic borrowing, with repayment projected by January 2026
A GoM is tasked with deciding the cess's future. Some states suggest merging it with the highest GST rate to maintain stable revenue and reduce taxpayer burden
GoM must assess if permanently imposing higher taxes is justified, as subsuming cess into the base rate could complicate GST and increase the number of slabs
A GoM is reviewing GST rate rationalisation, proposing fewer slabs to simplify the structure, making it more efficient for businesses and tax authorities
An ideal GST system should have 3 slabs: a lower rate for essentials, a higher rate for select goods, and a middle rate, with cess subsumed for limited items
The GST Council must simplify the system, aiming for revenue neutrality, as removing the compensation cess would significantly lower tax collections