What is the GST Compensation Cess?
The GST tax regime was rolled out in India on July 1, 2017. At that point in time, there was a five-year agreement between the centre and the state governments that all the states would be compensated for any revenue loss due to switching to the GST tax regime.
And hence, GST Compensation Cess was introduced to fund this compensation to be made by the Central Government. This cess is levied on goods in the 28% slab, such as automobiles, air-conditioners etc.
Officially, this agreement was to end on June 30, 2022.
Why is it Extended Till March 2026?
The central government decided to extend compensating the states for any revenue shortfall due to the switchover to the GST regime, thus continuing the GST Compensation Cess as well!
The decision will help to make up for the shortfall in the GST Compensation Cess collections due to the COVID-19 pandemic.
What’s in it for Investors?
As a result of this extension, consumers will have to pay the GST Compensation Cess until March 2026, for which they will have to shell out some extra money from their pockets, decreasing their disposable incomes.
But on a positive note, the cess will be used to pay back loans taken by the centre during the pandemic.
Thus, this move will lead to a massive saving in interest costs for the government, which is good for the economy’s health!
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