The government has taken a big decision. The government has extended the deadline for levying GST Compensation Cess to 2026. The GST Council has taken this decision in view of the shortfall in revenue collection during the last two financial years.
New Delhi, PTI. The government has extended the deadline for levying the GST Compensation Cess by nearly four years to March 31, 2026. According to the notice issued by the Ministry of Finance, as per the Goods and Services Tax (Period of Cess and Collection) Rules 2022, 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, decided to extend it till March 2026 to make up for the shortfall in revenue collection and repay loans in the last two financial years. After the 45th meeting of the GST Council in Lucknow in September last year, Sitharaman had said that the system of paying compensation to states for revenue shortfall resulting from subsuming their taxes such as VAT into the uniform national tax GST, would end in June 2022. Will go
Compensation cess to be levied on luxury and demerit goods to repay the loan will continue to be collected till March 2026. With regard to shortfall in cess collection to meet the resource gap of 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. have been issued.
The Center has paid Rs 7,500 crore as interest cost for the loan in 2021-22 and Rs 14,000 crore is to be paid in this financial year. Repayment of principal will start from 2023-24, which will continue till March 2026.
The Goods and Services Tax (GST) was implemented in the country with effect from 1st July 2017 and states were assured compensation for a period of five years for any loss of revenue due to the implementation of GST.
However, the protected revenue of the states is growing at a compounded rate of 14 per cent, while the cess collection has not grown in that proportion. COVID-19 has 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 said that with the extension of compensation cess, products like tobacco, cigarettes, hookah, aerated water, high-end motorcycles, aircraft, yachts and motor vehicles will continue to be charged with higher tax rates. . KPMG Partner Indirect Tax in India Abhishek Jain said that whether the states will be compensated over 5 years or not, the issue may be finally decided in the upcoming GST Council meeting.