The robust collections from the goods and services tax have put the Centre in a position to repay in advance the huge sums it borrowed from the market to clear the GST shortfall of states during the Covid period, according to finance ministry estimates.`
After borrowing Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 on behalf of states and using the GST compensation cess to repay the lenders, the Centre is now grappling with the future of compensation cess after it expires in 2025-26.
Any move to continue with cess after 2025-26 is likely to be opposed by industry, which can pass on the benefits to consumers in the form of a price cut.
The next meeting of the GST Council, likely to be held after the new government at the Centre is formed, has to take a call on cess.
As the cess sum is not shared with states, they could also oppose it.
In any case, it cannot continue in its present form as it was introduced to compensate the states for revenue loss through a constitutional amendment.
Either it lapses or any change has to be done through an amendment.
Finance ministry officials pointed out the possibility of amendments to let the cess regime continue after 2025-26 in some other form.
The industry could lobby to push for discontinuation to make the products cheaper and benefit the consumers, kicking off a consumption-led growth which will generate higher revenues.
The compensation cess is levied on products considered as sin or luxury goods and includes tobacco products, soft drinks and motor vehicles.
Other items such as pan masala attracts 60 per cent cess. Aerated water, lemonade and caffeinated beverages attract 12 per cent cess and different types of motor vehicles, from 1 per cent to 22 per cent.
Read more at: The Telegraph online
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