New Delhi, Aug 27: The Goods and Services Tax (GST) Council, meeting on September 3, is expected to consider ending the compensation cess ahead of schedule, with October 31 set as the likely cutoff date.
Originally extended until March 2026, the cess was meant to help repay loans raised during the Covid-19 pandemic to cover states’ revenue shortfalls. Officials say the ₹2.69 lakh crore borrowing is likely to be fully repaid by October 18, though the levy may continue until month-end to ensure smooth closure.
Sources suggest that collections could generate a surplus of ₹2,000–3,000 crore, which would be shared equally between the Centre and the states.
The cess, first introduced in 2017 to reassure states about revenue losses under GST, was initially valid for five years. However, the pandemic forced an extension until 2026. Under the law, collections must end once loan repayments are complete.
Meanwhile, the Finance Ministry has proposed restructuring GST into just two slabs — 5% and 18% — replacing the current four-tier system. Prime Minister Narendra Modi has said the reform will lower prices of goods and services, calling it a “Diwali double bonus” for the poor and middle class.
