No decision on extending compensation to states

New Delhi: The 47th GST council meeting has not taken any decision on the contentious issues of extension of GST compensation mechanism for states. Puducherry Finance Minister K Lakshminarayanan said that said all states sought an extension of the compensation mechanism, but no decision has been taken.

A final decision is likely to be taken at the next meeting of the council in August. When GST was rolled out, states were promised compensation for revenue loss till June 2022. The compensation amount was raised from levying a cess in luxury, demerit and sin goods over and above the 28 per cent tax.

The Centre, last week, notified extension of the compensation cess, levied on luxury and demerit goods, till March 2026, to repay borrowing that were done in 2020-21 and 2021-22 to compensate states for GST revenue loss.

When a nationwide Goods and Services Tax (GST) subsumed 17 central and state levies from July 1, 2017, it was decided that states will be compensated for any loss of revenue from the new tax for five years. With two years being lost in the pandemic, states have sought an extension of this compensation mechanism.