GST Council Expected to Review Rate Rationalisation and Compensation Cess Plans: Sources

The GST Council is likely to meet soon to discuss rate simplification, rationalisation, and the future of the compensation cess, according to a government source.

“There are three or four different aspects relating to making GST simpler. We will take up the issue of compensation cess, rate rationalisation and simplification,” sources told PTI.

At its previous meeting in December, the GST Council, led by the Union Finance Minister and including state finance ministers, postponed consideration of the reports submitted by two Groups of Ministers (GoMs). These GoMs had recommended rationalising GST rates and reducing the tax on health and life insurance premiums, but their final reports are yet to be submitted to the Council.

The Groups of Ministers (GoMs) that suggested rate reductions and exemptions for certain sectors are still in the process of finalising their recommendations. Their reports have yet to be submitted to the GST Council for further consideration.

The Group of Ministers on Compensation Cess, headed by Minister of State for Finance Pankaj Chaudhary, is currently evaluating the future of the compensation cess after its existing term concludes in March 2026. At present, the cess is levied on luxury and sin goods and is mainly utilised to repay loans taken during the COVID-19 pandemic to compensate states for their GST revenue losses.

The Group of Ministers on Compensation Cess is actively exploring various options to continue collecting revenue from the cess beyond its current form. This includes assessing alternate options for retaining this source of revenue while ensuring that the proceeds are fairly distributed between the Centre and the states.

The Goods and Services Tax (GST), which was implemented in 2017, replaced several indirect taxes to create one tax structure in India. At present, there are four major GST slabs – 5 per cent, 12 per cent, 18 per cent, and 28 per cent. As GST guidelines continue to change, it is essential for business to keep updated on registration requirements, levy slabs, and due dates for compliance.