{"id":254827,"date":"2023-08-04T20:24:10","date_gmt":"2023-08-04T14:54:10","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=254827"},"modified":"2023-08-29T14:24:04","modified_gmt":"2023-08-29T08:54:04","slug":"six-years-of-gst-compensation-cess-still-needs-to-be-sorted-out","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/six-years-of-gst-compensation-cess-still-needs-to-be-sorted-out\/","title":{"rendered":"Six years of GST: Compensation cess still needs to be sorted out"},"content":{"rendered":"\n

Source<\/strong>– The post is based on the article \u201cSix years of GST: Compensation cess still needs to be sorted out\u201d <\/strong>published in the \u201cmint\u201d <\/strong>on 4th August 2023<\/strong>.<\/p>\n

Syllabus: <\/strong>GS3- Government budgeting<\/p>\n

Relevance:<\/strong> Issues related to GST<\/p>\n

News<\/strong>– The article explains the issues related to GST compensation cess.<\/p>\n

What are some facts related to GST compensation cess?<\/strong><\/h2>\n

The funding for GST compensation<\/strong> was sourced from a cess imposed on specific goods listed in a schedule to the 2017 Act<\/strong>. These mainly include tobacco, coal-based solid fuels, and fossil-fuelled motor vehicles.<\/p>\n

The schedule was also open-ended<\/strong>, allowing for the inclusion of any other supplies. This approach represented an exceptional statutory commitment<\/strong> to provide additional revenue.<\/p>\n

What are facts and statistics related to shortage in cess collection?<\/strong><\/h2>\n

Pandemic led to a significant increase in the required compensation while the collections from the cess <\/strong>declined. To address this discrepancy, the Centre resorted to special borrowing <\/strong>to cover the deficit in GST compensation.<\/p>\n

During the 49th meeting of the GST Council in February 2023, the outstanding payments<\/strong> for June 2022 amounting to \u20b90.16 trillion, were announced.<\/p>\n

During the five-year statutory period, states received a total of \u20b95.89 trillion in GST compensation<\/strong>, averaging \u20b91.18 trillion per year.<\/p>\n

However, the average annual revenue<\/strong> from the cess was only \u20b90.96 trillion. It is falling below the average annual compensation<\/strong> required.<\/p>\n

The cess collection<\/strong> for the entire financial year 2022-23 is totaling \u20b95.76 trillion. It is still lower than the \u20b95.89 trillion payout.<\/p>\n

The shortage in cess collection<\/strong> was not evenly distributed across all years. There was a surplus in the pre-pandemic year 2018-19. Yet ,\u20b90.15 trillion of arrears remained unpaid until the beginning of 2022-23.<\/p>\n

The likely reason for this delay is the late supply of audited figures of state revenues. <\/strong><\/p>\n

What is the government’s future plan for cess?<\/strong><\/h2>\n

In September 2021, during the 45th meeting of the GST Council, it was proposed to extend the cess until March 2026 to cover the repayment of the Centre’s special borrowing<\/strong> used to compensate for the pandemic years.<\/p>\n

In the most recent meeting, the GST Council recommended amending the Compensation Act rules <\/strong>to broaden the definition of taxable vehicles<\/strong> under the cess.<\/p>\n

Way forward-<\/strong><\/p>\n

GST Compensation Act<\/strong> does allow for a surplus in the compensation fund<\/strong> to be divided between the Centre and states in a specified manner. But, once its statutory function<\/strong> is fulfilled, it should be reclassified separately from the Compensation Act. <\/strong><\/p>\n

There is a need to consider repurposing and renaming the compensation cess<\/strong> on items like tobacco, coal, and fossil-fuelled transportation as a Pigouvian levy <\/strong>on goods with negative health or climate impacts.<\/p>\n

However, the utilization of the proceed<\/strong>s from such a climate cess should be guided by experts working in India on climate action. Additionally, the process to track the effectiveness <\/strong>of these critical expenditures needs to be carefully designed.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source– The post is based on the article \u201cSix years of GST: Compensation cess still needs to be sorted out\u201d published in the \u201cmint\u201d on 4th August 2023. Syllabus: GS3- Government budgeting Relevance: Issues related to GST News– The article explains the issues related to GST compensation cess. What are some facts related to GST… Continue reading Six years of GST: Compensation cess still needs to be sorted out<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,8184,11125],"class_list":["post-254827","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-indian-economy","tag-mint","entry"],"jetpack_featured_media_url":"","views":{"total":7,"cached_at":"","cached_date":1698457756},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/254827","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=254827"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/254827\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=254827"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=254827"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=254827"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}