Govt. Extends Compensation Cess Levy Upto 31 March, 2026

The government has notified the Goods and Services Tax (Period of Levy and Collection of Cess) Rules, 2022.

"The period for levy and collection of cess under sub-section (1) of section 8 of the Goods and Services Tax (Compensation to States) Act, 2017 shall be up to the 31st March, 2026," the notification read.

The additional time will allow the centre to repay the loans, including principal and interest, made to compensate states for GST collection shortfalls. The CGST Act required the Centre to reimburse states for any income deficits caused by GST implementation for a five-year period, until July 2022.

The Goods and Services Tax (Compensation to States) Act, 2017 was enacted to levy a Compensation Cess to provide compensation to the States for the loss of revenue arising on account of the implementation of the goods and services tax. It was implemented from the date, i.e. 01/07/2017, from which the provisions of the Central Goods and Services Tax Act were brought into force. It was for a period of five years or for such period as may be prescribed on the recommendations of the GST Council.

The cess will not be payable by those who have opted for the compensation levy. The input tax credit of the cess can be used only to pay the compensation cess and not the other taxes like CGST, SGST, UTGST, or IGST.

Notification No: No. 1/2022–Compensation Cess

Dated: 24th June, 2022

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