GST compensation cess to be levied beyond June 2022

New Delhi, Oct 5 : Even with consensus eluding a decision on the new formula to pay GST compensation to states, the 42nd meeting of the GST Council on Monday decided to extend the period of compensation cess beyond the five year transition period slated till June 2022 to meet the revenue gap.
Originally, the cess was to be levied till June 2022 to compensate the states for the revenue gap that emerged from the transition to the Goods and Services Tax (GST) regime in 2017. The extension would mean that cess would be collected for few more years to pay compensation dues of states arising between April 2020 and June 2022.
The decision, though beneficial for the states, comes as a setback for businesses which will have to pay the cess to compensate the states.
Among other major decisions, Finance Minister Nirmala Sitharaman said that the Centre will release compensation of Rs 20,000 crore (the amount collected from cess so far this fiscal) to states towards loss of revenue during 2020-21 by Monday night and an amount of about Rs 25,000 crore towards IGST of 2017-18 by next week.
As a further step towards reducing the compliance burden, particularly on the small taxpayers having aggregate annual turnover of Rs 5 crore, the Council’s earlier recommendation of allowing filing of returns on a quarterly basis with monthly payments by such taxpayers will be implemented with effect from January 1, 2021.
Such quarterly taxpayers would, for the first two months of the quarter, have an option to pay 35 per cent of the net cash tax liability of the last quarter using an auto generated challan, said an official statement.