The CBIC vide Notification No. 1/2022–Compensation Cess dated 24th June, 2022 has issued the Goods and Services Tax (Period of Levy and Collection of Cess) Rules, 2022 w.e.f. 1st July 2022, to extend the period for levy and collection of Compensation Cess under Section 8(1) of the Goods and Services Tax (Compensation to States) Act, 2017 upto the 31st March 2026. Thus GST Compensation Cess levy has been extended by further nearly four years.
With the extension of levy of compensation cess, goods like tobacco, cigarettes, hookah, aerated waters, high-end motorcycles, aircraft, yacht and motor vehicles will continue to bear the brunt of higher taxes rates.
To get the states on board prior-to the nationwide roll-out of the consumption-based tax that subsumed most state-level levies, the Centre had assured an annual GST revenue growth of 14 % for a period of five years to 30th June 2022. For the next five years, any shortfall will be covered by the compensation cess fund, according to the Centre.
The extension has been notified in accordance with the payback plan agreed upon at the GST Council meeting in September 2021. The extension of the cess will help repay the special borrowings over the last two financial year. The states will not be paid GST compensation from 1st July this year. Some states have demanded an extension but the Centre is not in favour.
The GST council will convene next week in Chandigarh.
The Notification can be read / downloaded at: https://egazette.nic.in/WriteReadData/2022/236790.pdf
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