GoM Likely To Seek 6-Month Extension For GST Compensation Cess Report
The Group of Ministers (GoM) on GST Compensation Cess is expected to request an additional six months to finalise its report, initially due by 31 December.
Minister of State for Finance and Chairman of the 10-member GoM, Pankaj Chaudhary, indicated the need for more time during a press briefing on Friday. "We may need at least six more months to complete the discussion and prepare the report," Chaudhary stated. The group has convened twice so far and will update the GST Council on its progress, after which the Council will decide on granting an extension.
Compensation Cess and Its Future
The GoM's mandate includes drafting a taxation proposal to replace the compensation cess, which was introduced to compensate states for revenue shortfalls following the GST implementation. Originally intended for a five-year period ending in June 2022, the cess was extended until 31 March 2026, to repay loans taken to address the GST revenue shortfall.
Government officials have hinted that while the cess is likely to continue beyond 2026, it might do so under a new framework or name.
Cess Collections and Targets
Compensation cess collections during the April-November period of FY24-25 grew by 6.5 per cent, surpassing the budget estimate (BE) growth rate of 4.1 per cent. However, this figure is lower than the double-digit growth recorded in the previous three fiscal years.
The reworked budget estimate for FY24-25 targets Rs 1.51 lakh crore in compensation cess collections. Data from the GST portal reveals collections of Rs 1.01 lakh crore so far, leaving approximately Rs 50,000 crore to be collected in the remaining four months. With an average monthly collection requirement of Rs 12,500 crore—slightly below the current average of Rs 12,600 crore—meeting the target appears feasible.
Capital Expenditure and Infrastructure Focus
Chaudhary also highlighted the government’s commitment to infrastructure development, with capital expenditure rising from Rs 5 lakh crore in 2021-22 to Rs 11.11 lakh crore in 2024-25. "The focus of the Modi government is on building infrastructure. India's road, air, and rail connectivity has improved significantly over the last decade," Chaudhary noted.
In line with Prime Minister Narendra Modi's vision of making India a developed nation by 2047, the government is expected to continue prioritizing infrastructure and capital expenditure in the upcoming Budget for 2025-26.
The GST Council will likely consider the GoM's extension request at its next meeting, along with discussions on the broader implications of the compensation cess framework.