Ministers' panel discusses merger of GST compensation cess into taxes

group of ministers (GoM) on GST compensation cess, under Minister of State for Finance Pankaj Chaudhary, on Wednesday discussed merger of compensation cess into GST.

States suggested that during transition of cess, once it is decided to merge with taxes new goods should be ded to list of luxury, sin, and demerit goods.

States were of view that since compensation cess ends in March 2026, only way to restructure it is to merge levy with taxes and bring about separate tax rates for items on which cess is levied currently.

"GST compensation cess is coming to an end. A discussion needed to be done on what will be future of cess. Every state has given ir views. This was first meeting," Minister of State for Finance Pankaj Chaudhary said.

Should it continue as cess or be converted to tax and wher re would be changes in luxury, demerit, and sin goods items, Chaudhary said, "Discussion is going on".

next meeting of GoM on compensation cess is in second week of vember.

Sources said all states have suggested merger of taxes under GST, because compensation cess has expired.

"But new goods will be ded. Compensation period has ended and if it has to be brought under GST n it has to be restructured and brought in as taxes," sources said.

Group of Ministers (GoM), which includes members from Assam , Chhattisgarh , Gujarat , Karnataka, Mhya Presh , Punjab , Tamil Nu, Uttar Presh and West Bengal, will submit its report to GST Council by December 31.

In GST regime, compensation cess at varied rates is levied on luxury, sin and demerit goods over and above 28 per cent tax. proceeds from cess, which was originally planned for five years after GST roll-out or till June 2022, was used to compensate states for revenue loss incurred by m post introduction of GST.

In 2022, Council decided to extend levy till March 2026 to repay interest and principal amount of Rs 2.69 lakh crore worth loan taken in 2021 and 2022 fiscal years to make good states' revenue loss during Covid years.

With just one-and-a-half year remaining for cess to end, GST Council in its 54th meeting on September 9 decided to set up a GoM to decide future course of cess.