Extension of GST Compensation Cess
Central government has extended the time to levy GST compensation cess, till March 31, 2022.
- Time to levy GST compensation cess has been extended by around 4 years.
- Thus, according to Goods and Services Tax (Period of Levy and Collection of Cess) Rules, 2022, compensation cess will continue to be levied from July 1, 2022 till March 31, 2026.
- The levy of cess was scheduled to end on June 30, 2022. However, GST Council decided to extend it further.
- This decision was taken for repaying the loans taken in last two fiscal years, in a bid to make up the shortfall in their revenue collection.
- The decision to end paying compensation to states for revenue shortfall was taken after 45th GST Council meeting in Lucknow in September 2021.
Goods and Services Tax (GST)
GST was rolled out in India, with effect from July 1, 2017. States were assured of compensation for loss of any revenue, in the aftermath of implementation of GST for five years. Though, protected revenue of states has been increasing at 14 percent compounded growth rate, but collection of cesses did not grow in same proportion. This gap between protected revenue and actual revenue further increased due to covid-19 pandemic.
What is compensation cess?
Provision of compensation cess was created under the GST (Compensation to States) Act, 2017. The act assumed that, there will be an increase by 14 percent in the GST revenue of each State, from the amount collected in 2015-16. It was specified that, in case state had collected tax less than 14%. in any year, they would be compensated for shortfall. This amount was decided to be paid every two months, on the basis of provisional accounts.
Compensation cess fund
The compensation cess fund was created to pay states for any revenue shortfall. Additional cess was imposed on some items and it was decided to use cess for paying the compensation.
Month: Current Affairs - June, 2022
Category: Economy & Banking Current Affairs - 2022
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