GST Compensation Cess to Increase up to March 2026

GST Compensation Cess

The deadline for the GST compensation cess has been increased to make up for the borrowings and arrears of compensation paid to states in the last two financial years. The government in its notification has said to extend the GST compensation cess up to March 2026. The Finance Ministry has confirmed the period of extension via an official notification released on June 25th 2022. However, the imposition of the GST compensation cess has already been done for specific goods and services.

The centre has assured an annual Goods and Services Tax revenue growth for a period of five years up to June 30 2022. It is done to get the states on board prior to the nationwide roll-out of the consumption-based tax that is levied on a state-level basis. Any shortfall in this GST revenue growth is generally met by the GST compensation cess provided to the states by the centre.

The extension in the deadline of the GST compensation cess has come off as a sigh of relief for many states. This extension now will be used to repay the special borrowings over the last two financial years. Earlier the GST compensation cess provided to the states by the centre was going to get ceased from the 1st of July 2022. Some states have earlier demanded an extension but the centre was not in favour. The GST council will have a meeting in Chandigarh next week.