No decision was taken on compensation cess to states in the first GoM meeting
Oct 16, 2024
New Delhi [India] October 16 : The ten-member Group of Ministers (GoM) panel, headed by the Union Minister of State for Finance Pankaj Chaudhary, met on Wednesday on the ongoing compensation cess issue. The meeting discussed the future of cess to states under the GST regime but no decision was taken says the minister.
"The meeting was called to discuss the issue of compensation cess. States put in their views on the issue. It was also discussed in the meeting whether the compensation cess duration is extended or reduced. But since today was the first meeting no decision was possible. The second meeting will be held in 2nd week of November at Delhi," said Pankaj Chaudhary
The debate was initiated by the states, and following preliminary discussions at the council, it was decided during the 54th GST Council meeting to propose a GoM tasked with conducting detailed discussions and formulating recommendations for further deliberations by the council.
The GoM was assigned to consider whether the ongoing compensation cess should continue post-repayment of the back-to-back loans taken to assist the states or whether it should be subsumed into the highest tax bracket.
Additionally, the panel was also assigned to discuss and deliberate on how to absorb or share the excessive cess collections expected after the repayment of these loans and their associated interest.
Other than Pankaj Chaudhary, MoS Finance GoI, the GoM panel includes Harpal Singh Cheema, Minister of Finance, Punjab; Om Prakash Choudhary, Minister of Finance, Chhattisgarh; Chandrima Bhattacharya, Minister of Finance, West Bengal; Ajanta Neog, Finance Minister of Assam; Kanubhai Desai, Finance Minister of Gujarat; Krishna Byre Gowda, Revenue Minister of Karnataka; Jagdish Devda, Deputy CM and Finance Minister of Madhya Pradesh; Thangam Thennarasu, Finance Minister of Tamil Nadu; and Suresh Khanna, Finance Minister of Uttar Pradesh.
As per the decisions of the 54th GST Council meeting, the repayment of loans and interest is expected to conclude by January 2026, with an estimated excessive collection of Rs 40,000 crore from now until March 2026.
The government estimates that GST compensation cess collections will continue beyond FY25 to meet the guaranteed commitment of around Rs 1.37 lakh crore for FY25, which is aimed at repaying several loans taken to support states during the COVID-19
The total compensation cess collections until March 2025 are estimated at around Rs 8.60 lakh crore, while the compensation paid to states until August 2024 amounts to Rs 6.64 lakh crore.
The loans taken to support states total at Rs 2.69 lakh crore, with interest on these loans approximately at Rs 51,000 crore.
The shortfall that needs to be cleared to meet total liability after the loans will be Rs 1.37 lakh crore, which has prompted the decision to extend cess collections beyond March 2022.
