New Delhi: The Goods and Services Tax Council is stipulated to meet on September 3. In its meeting the GST Council is likely discuss ending the compensation cess by October 31, says an IANS news report.
The GST compensation cess was set to end on March 31, 2026. Discussions, however, have started to conclude the cess collection earlier, as the loans taken during the Covid-19 pandemic to compensate states for revenue shortfalls are approaching full repayment, according to multiple media reports.
The repayment is expected to be completed around October 18, but the government may extend the levy until the end of October for smooth operations.
Reports citing government sources indicated that the cess collection may result in a surplus of about Rs 2,000–3,000 crore to be shared equally between the Centre and the states.
What Is Compensation Cess
Goods and Services Tax (Compensation to States) Act, 2017 was enacted to levy Compensation Cess for providing compensation to the States for the loss of revenue arising on account of implementation of the goods and services tax with effect from the date from which the provisions of the Central Goods and Services Tax Act is brought into force (01/07/2017), for a period of five years or for such period as may be prescribed on the recommendations of the GST Council.
How Is Compensation Cess Levied?
The Central Board of Indirect Taxes and Customs (CBIC) describes Compensation Cess as the one levied on goods imported into India is levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975, at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962, on a value determined under the Customs Tariff Act, 1975.
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When Is Compensation Cess Not Levied?
As per CBIC, Compensation Cess will not be charged on goods exported by an exporter under bond/LUT and the exporter will be eligible for refund of input tax credit of Compensation Cess relating to goods exported. In case goods have been exported on the payment of Compensation Cess the exporter will be eligible for refund of Compensation Cess paid on goods exported by him.Compensation Cess shall not be leviable on supplies made by a taxable person whohas decided to opt for composition levy.
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