Govt confirms extension of GST compensation cess until March 2026.

On 25 June, Saturday, the finance ministry of India confirmed through a gazette notification the goods and services tax (GST) compensation cess extension to March 2026.

The imposition of GST compensation cess on certain goods and services had already been extended until March 2026 to make up for the borrowings and arrears of compensation paid to states in the last two financial years.

To entice states ahead of the nationwide rollout of the consumption-based tax that subsumed most state-level levies, the Centre promised a 14 percent increase in GST revenue over a five-year period ending 30 June, 2022, with any shortfall covered by the compensation cess fund.

Now, the extension of the cess will help repay the special borrowings over the last two financial year. The states will not be paid the so-called GST compensation from July 1 this year. Some states have demanded an extension but the Centre is not in favour.

The GST Council will meet in Chandigarh next week.