The Government in an important and timely move has decided to extend the levy and collection of GST Compensation Cess up to 31st March 2026, which was supposed to expire on 30-06-2022.
In this regard a Notification No: 01/2022 – Comp.Cess, dt: 24-06-2022 has been issued in terms of the powers vested under sub-section (2) of section 12 read with section 8 of the Goods and Services Tax (Compensation to States) Act, 2017, by notifying new rules called the Goods and Services Tax (Period of Levy and Collection of Cess) Rules, 2022 which shall come into force with effect from the 1st day of July, 2022 and will continue till 31st March 2026.
GST Compensation Cess is levied by the Goods and Services Tax (Compensation to States) Act 2017.
The objective of levying this cess is to compensate the states for the loss of revenue arising due to the implementation of GST by a rate of 14% from the base year with effect from on 1st July 2017 for a Transition period of five years or such period as recommended by the GST Council.
All taxpayers who are engaged in the supply of selected goods or services other than exporters and composition taxpayers will collect compensation cess. This will also include compensation cess chargeable on certain goods imported to India.
In case compensation cess is paid on exports, the exporter can claim refund of the same.
The extension of Cess facilitates for paying off the loan, which was taken for all the states, for the compensation that could not be paid in 2020 and somewhat, not fully, paid in 2021.
So the amount collected from the extended cess will go towards payment of the compensation amount borrowed and the interest on it.
So, as of now, it can be seen that Compensation Cess levy on notified supply of Goods / Services will continue till 31st March 2026.
Adding on…… it is opined here that, the extension does not mean that the States will be compensated for the loss of revenue even beyond 01.07.2022. It appeared to have stopped as on 30-06-2022.
The reasoning lies on the fact that the definition of transition period still remains as five years from 01.07.2017, for which compensation is payable.
So, this levy of Compensation CESS beyond 01.07.2022 presumably would be used by the Central Government only to meet the backlog between collection of compensation CESSn and compensation payable for the five years upto 30.06.2022.
More interesting developments awaited……..😂