GoM on cessation likely to seek 6-month extension from GST Council in December 21 meeting: report

Last update:December 13, 2024, 5:04 p.m. IST

The GoM was initially expected to submit its report by December 31, 2024.

The GST law requires that any excess collected in the transfer pool is then shared equally between the Center and the states.

The Group of Ministers (GoM) set up by the Goods and Services Tax (GST) Council to explore mechanisms for taxing luxury and demerit goods after the abolition of the tax will seek more time to finalize its recommendations at the next Council meeting on December 21. According to sources, the GoM, chaired by Minister of State for Finance Pankaj Chaudhary, believes that six months would be enough to finalize its report.

“Deliberations within the GoM on the cessation are still ongoing. It will be discussed in the GST The Council will meet on December 21. The GoM will request an extension to submit its final report. Another six months should be enough to finalize the GST tax report,” a source told Moneycontrol.

The GST Council, at its meeting on December 21, will discuss the status of the Mauritius government’s report on the tax, the source added.

The GoM was initially expected to submit its report by December 31, 2024. However, its deliberations are ongoing, with additional legal and procedural complexities to resolve.

“The GoM is still mulling over various options and needs more time to address the legal aspects and finalize its proposals,” another source had told Moneycontrol earlier. The GoM held its last meeting on December 2 in New Delhi.

The GoM was formed following the 54th meeting of the GST Council in September 2024. It comprises 10 members, including representatives from Assam, Chhattisgarh, Gujarat, Karnataka, Madhya Pradesh, Punjab, of Tamil Nadu, Uttar Pradesh and West Bengal. The committee’s task is to recommend a new tax structure to replace the compensation tax, which is scheduled to end in March 2026.

The GoM recommendations have significant implications for the future structure of the GST. It must determine whether to maintain the tax or introduce additional taxes, define the applicable rates and assess the necessary legislative changes.

The compensation tax, introduced at the start of the GST, is levied on luxury, sin and inept goods, above the highest GST cap of 28 per cent. Its main objective was to compensate states for revenue losses resulting from the implementation of GST. Initially scheduled for five years (ending June 2022), the tax was extended till March 2026 to repay Rs 2.69 lakh crore of loans taken during the COVID-19 pandemic to cover states’ revenue shortfall . If the loan is repaid early, the GoM will also have to decide on the treatment of excess cess collected.

The GST law requires that any excess collected in the transfer pool is then shared equally between the Center and the states.

Currently, GST operates on a four-tier structure of 5 percent, 12 percent, 18 percent and 28 percent. The GST law allows a maximum rate of 40 percent.