GST compensation cess extended till March 2026, govt notifies

New Delhi: According to a notification issued on Friday, June 24, the central government has extended the Goods and Services Tax (GST) compensation levy until March 2026. This compensation window extension, however, is not for states, according to the notice. The expansion of the GST compensation charge has made it possible to repay previous borrowings undertaken to pay promised compensation to states. This comes just as the GST council is set to meet in a few days.

"In exercise of the powers conferred by sub-section (2) of section 12 read with section 8 of the Goods and Services Tax (Compensation to States) Act, 2017 (15 of 2017), the Central Government hereby makes the following rule, on the recommendations of the Council: "On Friday, the finance ministry issued an extraordinary gazette. Read More: 

"The time for levying and collecting cess under sub-section (1) of section 8 of the Goods and Services Tax (Compensation to States) Act, 2017 shall be extended till March 31, 2026." the gazette further read. Read More: 

The extension was ordered to repay previous borrowings promised compensation to states. The prolongation of the GST levy will also aid in the payment of compensation to states due for the months of May and June 2022.

The levy of GST compensation cess on some products and services has already been extended until March 2026 to compensate states for borrowings and arrears of compensation paid in the previous two fiscal years.

In a move to get all states on board with the new norm that subsumed most state-level levies, the Centre pledged a GST revenue growth of 14% per year for five years up to June 30, 2022, while rolling out the regime in 2017. For the next five years, any shortfall will be covered by the compensation cess fund, according to the Centre.

The extension has been notified in accordance with the payback plan agreed upon at the GST Council meeting in September 2021. States will not receive GST compensation beginning July 1st of this year. Despite the fact that some states have requested an extension, the Centre remains opposed. The GST council will convene next week in Chandigarh.