GST Council may replace compensation cess with 2 new levies: Report
The GST Council is considering a major overhaul of the current cess structure, with plans to introduce a Health Cess and a Clean Energy Cess once the existing compensation cess expires in March 2026, CNBC-TV18 reported, citing government sources.
The proposal is expected to be taken up by the Group of Ministers (GoM) on Compensation Cess, chaired by Minister of State for Finance Pankaj Chaudhary. Sources quoted in the report said that a meeting of the GoM is likely to be scheduled soon, and the GST Council may deliberate on the matter before the Monsoon Session of Parliament.
The compensation cess was introduced to offset states' revenue losses following the rollout of GST in July 2017. Initially intended to end in June 2022, the cess was extended to help repay loans raised to cover the compensation gap during the pandemic. It is now scheduled to legally end on March 31, 2026.
The GoM has reportedly reached a near-consensus on replacing the current cess with two separate levies. The Health Cess would be applicable on sin goods such as tobacco products, while the Clean Energy Cess would target items like coal and high-end automobiles. These proposals, sources said, reflect the government's emphasis on public health and environmental priorities. The idea is to continue generating revenue through a cess-based model, but with a sharper focus on social and sustainability goals, rather than extending the compensation mechanism designed for states.
Most states are said to be supportive of the move, especially since it targets non-essential and harmful goods. However, the GoM is expected to meet once more before formally submitting its recommendations to the Council.
Despite broad agreement within the GoM, legal and constitutional issues could complicate the rollout. The current GST framework does not permit the introduction of new cesses, and any fresh levy would likely require a constitutional amendment. Tax experts quoted by CNBC-TV18 noted that the compensation cess was allowed only as a transitional arrangement. Introducing new cesses, they argue, could violate the fundamental GST principle of 'one nation, one tax.'
Concerns have also been raised about how revenue from the proposed cesses would be distributed. One tax expert told CNBC-TV18 that if the Centre retains the entire proceeds, states may oppose the plan, particularly since they had surrendered their individual taxation powers in exchange for a shared revenue system.
The GoM on Compensation Cess was set up by the GST Council in September 2024 to chart a post-cess roadmap. It was initially expected to submit its report by the end of December 2024, but the timeline was extended. The full GST Council, which includes the Union Finance Minister and finance ministers of all states, is now expected to meet in late June or early July. Apart from the cess issue, the agenda may include discussions on GST rate rationalisation and steps to simplify compliance.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Hindu
2 hours ago
- The Hindu
Ahead of Yoga Day, GST relief sought for yoga training institutions
With only two days left for International Yoga Day, MP for Mysuru Yaduveer Krishnadatta Chamaraja Wadiyar on Thursday appealed to the Union government to reduce the Goods and Services Tax (GST) levied on yoga training institutions. In a meeting with Union Finance Minister Nirmala Sitharaman in New Delhi, Mr. Yaduveer submitted a memorandum, requesting for a review and reduction of the 18% GST currently imposed on yoga schools. He said that such institutions, many of which are small and community-based, were facing financial challenges due to their classification under the same GST slab as commercial fitness centres and gyms. 'Yoga is deeply embedded in Indian culture and has achieved global recognition. Today, it is a way of life,' Mr. Yaduveer said. He said Mysuru is described as the 'Yoga Capital of the World', and stressed on the role of Prime Minister Narendra Modi in promoting yoga on the global stage, leading to the declaration of June 21 as International Day of Yoga. With the countdown to Yoga Day under way, Mr. Yaduveer urged the Finance Minister to provide much-needed relief to yoga institutions.
&w=3840&q=100)
Business Standard
5 hours ago
- Business Standard
12-hour work shift in IT? Karnataka govt faces backlash over proposal
The Karnataka government's proposal to amend existing labour laws and extend working hours in the IT, ITeS, and BPO sectors to 12 hours a day has triggered widespread criticism from employee unions and ignited debate across social media. In a meeting held on Wednesday by the state's Labour Department with industry stakeholders and trade unions, it was suggested that the Karnataka Shops and Commercial Establishments Act be amended to permit a longer workday. At present, the Act limits work to a maximum of 10 hours per day, including overtime. The Karnataka State IT/ITES Employees Union (KITU) strongly opposed the proposal, describing it as a "form of modern-day slavery" and accusing the government of prioritising corporate profits over workers' rights. The union warned that enabling 12-hour shifts could lead to a two-shift system replacing the current three-shift system, potentially rendering one-third of the workforce redundant. 'This amendment will normalise inhuman conditions. It's not about productivity, it's about appeasing corporate bosses by turning workers into machines,' said KITU leader Suhas Adiga to news agency PTI after attending the meeting alongside fellow unionist Lenil Babu. KITU argued that such a move would erode work-life balance, worsen mental health issues, and further entrench job insecurity in the IT sector. Citing the State Emotional Wellbeing Report 2024, the union highlighted that 90 per cent of corporate employees under the age of 25 already suffer from anxiety. The union also pointed to global trends, noting that many countries are now recognising the negative effects of extended work hours and are enacting laws to establish the "right to disconnect" as a fundamental employee right. Narayan Murthy hours: Internet trolls 12-hour workday proposal As news of the government's proposal spread, social media erupted with memes and commentary. Many memes and jokes involved Infosys co-founder Narayana Murthy, who last year controversially advocated for a 70-hour workweek and criticised the concept of work-life balance. One user dubbed the proposed 12-hour shifts as "Narayana Murthy hours", another wrote, 'Narayana Murthy laughing in the corner after hearing that the Karnataka government plans to increase work hours to 12 hours per day for IT workers'. During the CNBC-TV18 Global Leadership Summit last year, Murthy had argued that as a developing country, India cannot afford the luxury of reduced working hours. He said that hard work and dedication were essential to achieve economic growth, remarking, 'We first have to get a life, then we can worry about work-life balance'. Despite the uproar, the Karnataka government has not issued an official clarification on the proposed changes or whether they will move forward with the legislative amendment. Meanwhile, KITU has called for collective resistance from all employees in the sector.
India Today
6 hours ago
- India Today
GST Council may replace compensation cess with 2 new levies: Report
The GST Council is considering a major overhaul of the current cess structure, with plans to introduce a Health Cess and a Clean Energy Cess once the existing compensation cess expires in March 2026, CNBC-TV18 reported, citing government sources. The proposal is expected to be taken up by the Group of Ministers (GoM) on Compensation Cess, chaired by Minister of State for Finance Pankaj Chaudhary. Sources quoted in the report said that a meeting of the GoM is likely to be scheduled soon, and the GST Council may deliberate on the matter before the Monsoon Session of Parliament. The compensation cess was introduced to offset states' revenue losses following the rollout of GST in July 2017. Initially intended to end in June 2022, the cess was extended to help repay loans raised to cover the compensation gap during the pandemic. It is now scheduled to legally end on March 31, 2026. The GoM has reportedly reached a near-consensus on replacing the current cess with two separate levies. The Health Cess would be applicable on sin goods such as tobacco products, while the Clean Energy Cess would target items like coal and high-end automobiles. These proposals, sources said, reflect the government's emphasis on public health and environmental priorities. The idea is to continue generating revenue through a cess-based model, but with a sharper focus on social and sustainability goals, rather than extending the compensation mechanism designed for states. Most states are said to be supportive of the move, especially since it targets non-essential and harmful goods. However, the GoM is expected to meet once more before formally submitting its recommendations to the Council. Despite broad agreement within the GoM, legal and constitutional issues could complicate the rollout. The current GST framework does not permit the introduction of new cesses, and any fresh levy would likely require a constitutional amendment. Tax experts quoted by CNBC-TV18 noted that the compensation cess was allowed only as a transitional arrangement. Introducing new cesses, they argue, could violate the fundamental GST principle of 'one nation, one tax.' Concerns have also been raised about how revenue from the proposed cesses would be distributed. One tax expert told CNBC-TV18 that if the Centre retains the entire proceeds, states may oppose the plan, particularly since they had surrendered their individual taxation powers in exchange for a shared revenue system. The GoM on Compensation Cess was set up by the GST Council in September 2024 to chart a post-cess roadmap. It was initially expected to submit its report by the end of December 2024, but the timeline was extended. The full GST Council, which includes the Union Finance Minister and finance ministers of all states, is now expected to meet in late June or early July. Apart from the cess issue, the agenda may include discussions on GST rate rationalisation and steps to simplify compliance.
