Next steps in GST

Cess should not be fully subsumed

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The pandemic delayed a significant decision in administering goods and services tax (GST). The tax came into being in 2017 with a promise to compensate state governments for revenue losses during the first five years. The funds to compensate the states were raised by imposing a compensation cess on certain items in the highest GST bracket. In normal circumstances, the compensation cess would have ended in 2022. However, during the pandemic, which significantly affected tax collection, it was decided states would be compensated for the revenue loss through borrowing, and cess collection would be extended to repay the debt raised on this account, along with interest. Thus, the cess is being collected to repay ₹2.7 trillion raised during the pandemic. According to estimates, repayment will be completed by January 2026. Thus, it is important to decide the future course and necessary legal changes in time.