 "A crucial GoM formed to reshape GST luxury taxes as compensation cess nears its end, sparking intense debate ahead.")
The Goods and Services Tax (GST) Council has established a 10-member Group of Ministers (GoM) to evaluate the taxation of luxury and sin goods, set to conclude once the compensation cess ends in March 2026. Chaired by Minister of State for Finance Pankaj Chaudhary, the GoM will propose whether to maintain the cess or replace it with an additional tax, along with recommendations for new tax rates and slabs. This comes after an extension of the compensation cess, originally intended for five years, was agreed upon to address revenue losses due to the pandemic. The GoM is expected to submit its report by the end of December 2024.
Title: GST Council Forms Group to Decide Future of Compensation Cess
The Goods and Services Tax (GST) Council has recently established a 10-member Group of Ministers (GoM) led by Minister of State for Finance Pankaj Chaudhary. This committee’s task is to explore the taxation of luxury and demerit goods after the compensation cess expires in March 2026.
The GoM includes representatives from several states, including Assam, Chhattisgarh, Tamil Nadu, and West Bengal. They are expected to report back to the GST Council by December 31. Currently, a compensation cess is levied on luxury and sin goods in addition to the standard GST rates, which are set at 5, 12, 18, and 28 percent. Originally intended to last five years, this cess was extended in 2022 to help states recover from revenue losses during the COVID-19 pandemic.
With approximately 18 months remaining until the cess ends, the GoM’s recommendations will be critical in deciding how to proceed with taxation on these goods. They will evaluate whether to continue the cess or impose new taxes, and they must determine the appropriate rates and necessary legislative changes.
As it stands, the total repayment of the substantial Rs 2.69 lakh crore loan taken during the pandemic is anticipated to be complete by early 2026, marking a crucial turning point for GST revenue and state compensation dynamics.
Stay tuned for more updates as the GoM works on these crucial recommendations that could shape the future of GST in India.
Tags: GST, Goods and Services Tax, Pankaj Chaudhary, compensation cess, tax structure, luxury goods, Indian economy, state revenue.
What is the GST Council’s GoM on compensation cess?
The GST Council’s Group of Ministers (GoM) on compensation cess is a team working to evaluate how to manage the fund that supports states when they lose money due to GST.
Why is the GoM focusing on compensation cess?
The GoM is focusing on compensation cess to ensure that states receive the financial support they need, as they rely on this fund to cover their revenue losses from the rollout of GST.
What kind of report is the GoM expected to produce?
The GoM is expected to produce a report that provides recommendations on how to continue funding the compensation cess and manage any challenges related to it.
When will the report be ready?
The report is expected to be ready by December 31.
How will this report affect the states?
The report will help states understand how they will be compensated for their revenue losses, which impacts their budgets and financial planning.
