Government Notifies GST Compensation Cess Extension To March 2026

The notification comes ahead of 47th GST Council meeting in Chandigarh which will begin on June 28.  

GST compensation cess extended

Source : Getty

New Delhi: In a latest notification, the government has extended goods and services tax (GST) compensation cess to March 2026. The finance ministry confirmed the move through a gazette notification on June 25, reported the Economic Times. The notification comes ahead of 47th GST Council meeting scheduled in Chandigarh on June 28.  The notification on the GST compensation cess extension has come as per the repayment schedule agreed upon in September 2021 GST Council meeting to make up for the borrowings and arrears of compensation paid to states in the last two financial years.

The extension will also help in paying compensation to states due for the month of May and June 2022, as per the report.

Soon after the 45th GST Council meeting in Lucknow, Union finance minister Nirmala Sitharaman had said the regime of paying compensation to states for the revenue shortfall, resulting from subsuming their taxes, such as VAT in the uniform national tax GST will end in June next year.

However, it noted that the compensation cess levied on luxury and demerit goods, will continue to be collected till March 2026 to repay the borrowings that were done in 2020-21 and 2021-22 to compensate states for GST revenue loss.

GST Compensation Cess is levied by the Goods and Services Tax (Compensation to States) Act 2017.  The object of levying this cess is to compensate the states for the loss of revenue arising due to the implementation of GST on 1st July 2017 for a period of five years or such period as recommended by the GST Council.