• Notification Date: 10-03-2022
  • Notification No: N/A

GST Compensation to Repay State Loans Extended till 2026 by FM

As per the latest announcement of the Union Finance Minister Nirmala Sitharaman, the deadline for the Goods and Services Tax (GST) compensation cess has been extended till March 2026.

Finance Minister stated that the extension has been made with the intention of paying the loan that had been taken for providing compensation to the states in 2020. The loan had not been paid back by the Center till 2021. She added the total amount of the loan was not fully paid in between the years 2020-2021. The due amount was not paid to the states which resulted in a compound interest at the rate of 14 per cent each year. To repay the loan along with the interest, the Center would need to extend the GST compensation cess till March 2026.

The excess amount of cess that would be collected in the upcoming three years would be utilized for servicing the loans and interest that are required to be paid on it. Some other states like Karnataka have been asking for the extension of the compensation cess for a period of five years for making up for the losses made in the revenue. The states have suffered a major loss in their revenue collection due to the abolishment of the VAT and other taxes on goods and services. Nirmala Sitharaman has continuously dismissed the matter of rising debt in the states across India, stating that it is not the responsibility of the Center to view the debt rise of each state individually.