A Group of Ministers (GoM), tasked by the goods and services tax council to look at the future of compensation cess, may seek extension of three months to conclude its discussions and submit findings.
The panel will recommend the future action on the levy of compensation cess on sin goods under the goods and services tax (GST) regime beyond March 31 2026.
The GoM headed by minister of state for finance Pankaj Chaudhary met Monday to discuss the future of compensation cess, but, could not discuss all the agenda items.
The members were of the view that more meetings may be required to cover all agenda items.
“There will be one more meeting before the GST council but it is difficult to cover all aspects and the GoM may seek three months extension to the GST council to submit its final report,” a person aware of the deliberations said.
It was asked by the council to submit its report by December 31.
“There are many aspects which remain untouched like what will happen to the Rs 40,000 surplus cess collected after paying back to back loan and interest taken by the states,” the person added.
The next GST council meeting is scheduled on December 21.
The GoM comprises 10 members, including representatives from Assam, Chhattisgarh, Gujarat, Karnataka, Madhya Pradesh, Punjab, Tamil Nadu, Uttar Pradesh, and West Bengal.
In its first meeting on October 16, the GoM decided not to extend the levy to any new item until a final call on its future is taken.
Compensation cess, levied on goods in the top bracket of 28% under GST, was introduced after the 2017 rollout of the indirect tax to cover any shortfall in states’ revenue due to the switchover to the new regime for five years.
It was again extended in 2022 till March 2026 for the repayment of interest and principal sum of Rs 2.69 lakh crore borrowing undertaken by the Centre on behalf of states during the Covid-19 pandemic to meet the deficit in the cess fund.
The 54th GST Council meeting had set up the GoM for detailed discussions on the issue.
The panel will decide whether it should be subsumed into the highest tax bracket or replaced by some other cess.
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