New Delhi, Dec 2 (PTI) The group of ministers (GoM) on GST compensation cess, under Minister of State for Finance Pankaj Chaudhary, on Monday decided to seek about 6-month extension from GST council for submission of report, an official said.

The GoM, which includes members from Assam, Chhattisgarh, Gujarat, Karnataka, Madhya Pradesh, Punjab, Tamil Nadu, Uttar Pradesh and West Bengal, was mandated to submit its report to the GST Council by December 31.

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"The GoM decided that there are many legal issues involved in the compensation cess matter and different facets of law have to be discussed threadbare, which would take time. It was decided to seek extension of time for submission of report to the council," the official said.

The official further said that 5-6 months of extension could be sought from the Council.

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"We have time till March 2026 to take a decision on cess. Hence there is still time to discuss and also a legal opinion may have to be taken on the issue," the official said.

In the GST regime, compensation cess at varied rates is levied on luxury, sin and demerit goods over and above the 28 per cent tax. The proceeds from the cess, which was originally planned for five years after GST roll-out or till June 2022, was used to compensate states for revenue loss incurred by them post the introduction of GST.

In 2022, the Council decided to extend the levy till March 2026 to repay the interest and the principle amount of the Rs 2.69 lakh crore worth loan taken in the 2021 and 2022 fiscal years to make good states' revenue loss during Covid years.

With just one-and-a-half year remaining for the cess to end, the GST Council in its 54th meeting on September 9 decided to set up a GoM to decide the future course of the cess.

In the previous meeting of the GoM on October 16, states recalled the discussions that took place in the 7th GST Council meeting held on December 22-23, 2016, wherein the then Union Finance Minister Arun Jaitley had said that the compensation cess could be merged with the tax once the 5-year period of the levy ends.

Before the implementation of the Goods and Services Tax (GST) from July 1, 2017, Centre and states had agreed to levy cess on certain luxury, sin and demerit goods over and above the 28 per cent tax rate. The proceeds from the cess, which was called compensation cess, would go towards compensating states for revenue loss suffered post GST implementation for a 5 year period.

As per the minutes of the 7th GST council meeting, Jaitley had stated that the Council in its previous meetings had discussed the mechanisms for funding compensation.

"...finally the formulation that was agreed upon was the one which was least burdensome for consumers, namely to collect cess on certain luxury and demerit goods in excess of 28 per cent tax, and that after five years, this cess could be merged with the tax," said by Jaitley as per the minutes of the 7th Council meeting.

Sources said that states also suggested that once it is decided to merge the cess with taxes, no new goods should be added to the list of luxury, sin and demerit goods.

States were of the view that since the compensation cess ends in March 2026, the only way to restructure it is to merge the levy with the taxes and bring about separate tax rates for the items on which cess is levied, a source had said.

(This is an unedited and auto-generated story from Syndicated News feed, LatestLY Staff may not have modified or edited the content body)