Extension of GST compensation cess levy till March 2026
Recently the deadline for the Goods and Services Tax (GST) reimbursement cess has been extended till March 2026.
As per the Goods and Services Tax (Period of Cess and Collection Period) Rules, 2022, Reimbursement Cess will continue to be levied from July 1, 2022 to March 31, 2026.
The levy of the cess was to end on June 30, 2022. But the GST Council headed by the Union Finance Minister had decided to expand it. This extension in the period was done to enable the states to repay the loans taken earlier to compensate for the loss in revenue due to GST.
However, whether the reimbursement will be given to the states for the extended period has not been decided yet.
The Goods and Services Tax regime was implemented in the year 2017. It is a destination based tax on consumption of goods and services.
As per the provisions of the Goods and Services Tax (Reimbursement to States) Act, 2017, the states were assured of reimbursement for a period of five years for any loss of revenue due to the implementation of GST.
It was paid on a bi-monthly basis. GST Reimbursement Cess is levied on the supply of select goods or services or both.
These include luxuries, unnecessary and harmful items. For example: Pan masala, different tobacco products etc. are harmful items.
The Central Government has released the full amount of GST reimbursement due to the states till May 31, 2022. However, many states are seeking to extend the reimbursement to more than 5 years.
Source – The Hindu