BENGALURU: Union finance minister Nirmala Sitharaman on Wednesday said the Goods and Services Tax (GST) compensation cess has already been extended till March 2026.
However, the minister was quick to suggest that the extension was provided for “paying the loan which was taken for all the states in 2020 for the compensation which could not be paid that year and for that in 2021, not fully but somewhat.”
“So for the total amount between 2020 and somewhat in 2021, the amount which was due and could not be paid to the states with compounded interest of 14 per each year, we had taken a conscious decision that the centre would borrow back-to-back and it will give it to the states, and that amount which has to be therefore repaid and also the interest calculated on it, and the council is fairly seized on the matter that to repay this loan and interest it will be required to extend the GST cess compensation till March 2026. And that is what we have done,” said the minister.
As a result, the finance minister indicated that the excess cess collected over the next three years of extension will go towards servicing the loans and interest to be paid on it.
“So the amount collected from the extended cess collection will go towards the compensation amount borrowed and the interest on it,” she said.
Karnataka, along with other states, have been seeking extension of cess for five years on account of loss in its revenue due to the abolishing of VAT and other taxes on goods and services. When asked about the rising debt of states like Karnataka, Sitharaman dismissed it by citing that the centre does not view each state’s individual debt rise.
