The Group of Ministers (GoM) on GST Compensation Cess is likely to request six more months to complete its report, which was initially due by December 31, 2024. Pankaj Chaudhary, Minister of State for Finance and head of the 10-member GoM, said during a press briefing on Friday that additional time is needed. “We may need at least six more months to finish discussions and prepare the report,” he stated. So far, the group has met twice and plans to update the GST Council on its progress. The Council will decide whether to grant the extension.
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What Is Compensation Cess?
The GoM is working on a new plan to replace the GST compensation cess, which was introduced to help states cover revenue losses after GST was implemented. Originally, the cess was supposed to end in June 2022. However, it was extended until March 31, 2026, to repay loans taken to cover revenue shortfalls. Government officials have hinted that the cess might continue even after 2026, but under a new name or structure.
Current Collections and Targets
Between April and November of FY24-25, compensation cess collections grew by 6.5%, exceeding the budget estimate of 4.1%. However, this growth is slower compared to the previous three years.
The government aims to collect ₹1.51 lakh crore in cess this year. So far, ₹1.01 lakh crore has been collected, leaving about ₹50,000 crore to be collected in the next four months. With an average monthly target of ₹12,500 crore—just slightly below the current monthly average of ₹12,600 crore—the goal appears achievable.
Focus on Infrastructure Spending
Chaudhary also highlighted the government’s focus on infrastructure development. Capital expenditure has nearly doubled, from ₹5 lakh crore in 2021-22 to ₹11.11 lakh crore in 2024-25.
He stated, “The Modi government is committed to improving India’s infrastructure. Over the past decade, road, air, and rail connectivity has seen significant progress.”
The government is expected to prioritize infrastructure spending in the upcoming Budget for 2025-26, as part of Prime Minister Narendra Modi’s goal to make India a developed country by 2047.
Next Steps
The GST Council is expected to discuss the GoM’s request for more time at its next meeting. It will also review the long-term future of the compensation cess framework and explore ways to ensure states’ revenue needs are met.
