GoM on GST compensation cess holds first meeting: No new levies until future is decided

Oct 17, 2024

Synopsis
A group of ministers decided not to extend the GST compensation cess to new items until determining its future post-March 2026. The panel, led by Union minister Pankaj Chaudhary, will reconvene in November to deliberate on whether to continue the cess beyond repaying state-assisting loans or subsume it into the highest tax bracket.

The 10-member group of ministers (GoM) on compensation cess decided in its first meeting on Wednesday not to extend the levy to any new item until a final call on its future is taken, said people with knowledge of the matter.

The panel, headed by Union minister of state for finance Pankaj Chaudhary, is tasked with deciding on the future of compensation cess levied on sin goods under the goods and services tax (GST) regime beyond March 2026.

The GoM will meet again in November second week to hear members' views on the future of the cess. "It was just an introductory meeting with general discussion, and a detailed agenda will be set and discussed in the next meeting," said one of the persons, who did not wish to be identified.

Compensation cess, imposed on products in the 28% slab, was introduced after the 2017 rollout of GST to cover any shortfall in states' revenue due to the switchover to the new regime for five years.

The panel will consider whether the ongoing compensation cess should continue after repayment of the back-to-back loans taken to assist the states or whether it should be subsumed into the highest tax bracket. It will also decide on what to do with the excessive cess collections expected after the repayment of these loans and their associated interest.

[The Economic Times]