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GST Cess will stay: Finance Panel Chief
Why is it in news?
- According to the chairperson of the Fifteenth Finance Commission N.K. Singh, the levy of compensation cess on GST may have to be extended.
- K. Singh has indicated the extension till as late as 2025-26.
Details:
- The core mandate of the Finance Commission is to determine the devolution of tax proceeds between the Centre and states.
- The 15th Commission’s report for the five-year period of 2021-22 till 2025-2026, will be submitted to the government soon.
- It will factor in unpaid compensation dues while working out States’ revenue flow calculations beyond 2022.
Compensation Cess:
- Compensation cess was introduced as relief for States for the loss of revenues arising from the implementation of GST.
- States were guaranteed a 14% tax revenue growth in the first five years after GST implementation by the Central government.
- Any shortfall against it is supposed to be compensated by the Centre using the funds specifically collected as compensation cess.
- Compensation cess is levied on products considered to be ‘sin’ or luxury goods.