GST Panel Weighing Future of Compensation Cess

By: Admin
October 15, 2024
Categories: GST Recent News
4 Min Read

The Group of Ministers (GoM) on GST compensation cess will meet on October 16, 2024, in the national capital to discuss the future of the cess post-March 2026, as reported by sources. The panel will likely debate whether to continue the cess separately or subsume it into a higher tax bracket.

During the 54th GST Council meeting on September 9, Finance Minister Nirmala Sitharaman revealed plans to repay the loan taken to cover GST compensation shortfalls by January 2026, which could lead to a surplus of approximately Rs 40,000 crore by February-March 2026. The GoM, led by Minister of State for Finance Pankaj Chaudhary, has been tasked with formulating a proposal for the future taxation structure once the compensation cess ends.

The GST compensation cess was originally introduced to ensure states’ tax revenues grew by 14% annually following GST’s implementation. Though payments officially ended in June 2022, the cess was extended until March 2026 to repay a Rs 2.7 trillion loan taken during the pandemic.

As states remain reluctant to lose this revenue, it’s likely that the compensation cess will be retained beyond FY26, possibly in a “re-branded” form with a newly defined purpose.

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