Government extends GST compensation cess levy till March 2026

The compensation cess will continue to be levied from July 1, 2022, to March 31, 2026, as per a new notification ‘the Goods and Services Tax (Period of Levy and Collection of Cess) Rules, 2022,’ issued by the ministry of finance.
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NEW DELHI: The Union Finance Ministry has notified the goods and services tax (GST) compensation cess extension till March 2026.

The compensation cess will continue to be levied from July 1, 2022, to March 31, 2026, as per a new notification ‘the Goods and Services Tax (Period of Levy and Collection of Cess) Rules, 2022,’ issued by the ministry of finance.

The levy of cess was to end on June 30.

However, the GST Council chaired by Union Finance Minister Nirmala Sitharaman had agreed to extend the levy of cess deadline by four years till 2026.

The revenue from the GST compensation cess is used by the central government to pay for the borrowings and arrears of compensation paid to states in the last two financial years.

The Central government has borrowed and released Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 to meet the resource gap of states due to a shortfall in the release of GST compensation.

On these borrowings, the central government paid an interest of Rs 7,500 crore during the year 2021-22. Interest cost in the current financial year is estimated at Rs 14,000 crore.

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