Latest news with #GSTCouncil
India Today
2 days ago
- Business
- India Today
Two new GST levies may replace compensation cess, but at what cost?
With the compensation cess set to expire by March 1, 2026, the Centre is likely to propose two new levies — a Health Cess on tobacco and other harmful substances and a Clean Energy Cess on coal and automobiles, as part of the discussions at the upcoming GST Council meeting in move aims to fill the revenue gap that will open up once the transitional compensation cess is phased out. While these cesses are still under consideration, experts say they may introduce fresh complexity into the GST regime, especially for businesses and the broader Centre-State revenue-sharing IMPACT'GST was a landmark tax reform which then sought to replace a complex web of fragmented state taxation systems that were in existence before 2017,' said chartered accountant Siddharth Surana. 'Prior to 2017, states and union territories implemented and administered their own system of Value Added Tax, and the revenues from these taxes fell directly within their purview with no major need for fiscal co-operation and Centre-State harmony,' he added.'To offset the loss by the introduction of GST and the harmonisation of GST rates, the state governments were provided with compensation cess, which was a tax in addition to GST, and was applicable on certain demerit goods and sin products such as aerated beverages, automobiles and tobacco. The compensation cess was introduced only for a temporary period of time as a transitional measure, which was to end in 2022. However, with several extensions, this is likely to expire on 1st March 2026," Surana explained that the new cesses being discussed are unlikely to compromise the structural integrity of the GST system. 'In our understanding, as these levies are centrally proposed and are likely to follow the structure proposed by the central government, they are likely to be standard levies and do not pose a risk to return to the fragmented pre-GST tax structure,' he said.'Also, the taxes are targeted at very few products, mostly falling within the present 28% GST slab. Thus, while they may not affect the structure of GST, the major cause of concern would be distribution. The central and state governments would have to work out the method of distribution of proceeds of these cesses and this will require cooperative federalism,' Surana also pointed out that businesses are likely to feel the impact of any new levy on three key fronts.'In our opinion, the introduction of any new levy does have an impact on businesses on three fronts – costs, compliance and supply chain. The introduction of 2 new cesses are likely to increase the compliance burden on industry. It will also entail a change in the return formats and companies will have to adapt to the changing presentation and disclosure norms,' he compliance, Surana suggested that the policy intent behind these cesses is to influence corporate behaviour.'Further, it appears that the purpose of introducing these taxes is to increase the cost of products that are harmful to the environment and, therefore, may put more pressure on corporates to become more sustainable,' he added that the Clean Energy Cess, in particular, aligns with the government's push toward green energy. 'The use of coal as a source of power has tremendous ecological costs, and the replacement of coal with renewable sources of energy has been an objective of the government. We believe that the levy of cesses on products like automobiles will create ecological consciousness and force companies to revisit their supply chain and adopt sustainable practices.'
Time of India
3 days ago
- Business
- Time of India
AIC seeks GST exemption on all rural general insurance plans
India's largest rural insurer has called for the removal of the goods and services tax (GST) on all rural-focused general insurance products covering agriculture and allied risks to enhance affordability and increase coverage. At present 18% GST is levied on insurance products. Government-sponsored crop insurance schemes such as Pradhan Mantri Fasal Bima Yojana and Restructured Weather-Based Crop Insurance Scheme, which are also backed by government subsidies, are exempt from this levy. "Keeping in view the overall objective of 'Insurance for All by 2047', as well as the affordability level and purchasing power of the rural population, it would be desirable to extend similar support to all rural-centric and parametric products covering agri and allied risks," Lavanya Mundayur, chairman and managing director of public sector firm Agriculture Insurance Company Ltd, told ET. The GST Council, in its meeting in December 2024, deferred a decision on reducing taxes on health and life insurance. Live Events A group of ministers, mandated by the GST Council to look into taxation of insurance, has recommended removing the GST on insurance premiums paid for term life insurance policies and premiums paid by senior citizens towards health insurance. However, it proposed that 18% GST continue to be levied on premiums paid for policies with health insurance cover of more than ₹5 lakh. The next GST Council meeting is yet to be scheduled. India's overall insurance penetration dropped to 4% in 2022-23 from 4.2% in 2021-22, as per the latest available data. Over this period, life insurance penetration fell to 3% from 3.2%. The non-life insurance sector remained unchanged at 1%. Mundayur said that in order to further drive insurance penetration in the agricultural and rural segment, a basic standard vanilla cover, linked to crop yields, can be developed and, depending on geography and other state and central government subsidies, further add-ons can be incorporated. She said the insurer is in the process of partnering with banks, microfinance institutions, agri-techs and input suppliers for developing bundled insurance products for agriculture and allied activities. One of the focus areas for AIC is parametric insurance, which holds immense potential in addressing climate-induced agricultural risks in a faster, more transparent and cost-effective manner, she added. Economic Times WhatsApp channel )
India Today
3 days ago
- Business
- India Today
GST Council may replace compensation cess with 2 new levies: Report
The GST Council is considering a major overhaul of the current cess structure, with plans to introduce a Health Cess and a Clean Energy Cess once the existing compensation cess expires in March 2026, CNBC-TV18 reported, citing government sources. The proposal is expected to be taken up by the Group of Ministers (GoM) on Compensation Cess, chaired by Minister of State for Finance Pankaj Chaudhary. Sources quoted in the report said that a meeting of the GoM is likely to be scheduled soon, and the GST Council may deliberate on the matter before the Monsoon Session of Parliament. The compensation cess was introduced to offset states' revenue losses following the rollout of GST in July 2017. Initially intended to end in June 2022, the cess was extended to help repay loans raised to cover the compensation gap during the pandemic. It is now scheduled to legally end on March 31, 2026. The GoM has reportedly reached a near-consensus on replacing the current cess with two separate levies. The Health Cess would be applicable on sin goods such as tobacco products, while the Clean Energy Cess would target items like coal and high-end automobiles. These proposals, sources said, reflect the government's emphasis on public health and environmental priorities. The idea is to continue generating revenue through a cess-based model, but with a sharper focus on social and sustainability goals, rather than extending the compensation mechanism designed for states. Most states are said to be supportive of the move, especially since it targets non-essential and harmful goods. However, the GoM is expected to meet once more before formally submitting its recommendations to the Council. Despite broad agreement within the GoM, legal and constitutional issues could complicate the rollout. The current GST framework does not permit the introduction of new cesses, and any fresh levy would likely require a constitutional amendment. Tax experts quoted by CNBC-TV18 noted that the compensation cess was allowed only as a transitional arrangement. Introducing new cesses, they argue, could violate the fundamental GST principle of 'one nation, one tax.' Concerns have also been raised about how revenue from the proposed cesses would be distributed. One tax expert told CNBC-TV18 that if the Centre retains the entire proceeds, states may oppose the plan, particularly since they had surrendered their individual taxation powers in exchange for a shared revenue system. The GoM on Compensation Cess was set up by the GST Council in September 2024 to chart a post-cess roadmap. It was initially expected to submit its report by the end of December 2024, but the timeline was extended. The full GST Council, which includes the Union Finance Minister and finance ministers of all states, is now expected to meet in late June or early July. Apart from the cess issue, the agenda may include discussions on GST rate rationalisation and steps to simplify compliance.
India.com
5 days ago
- Business
- India.com
Gujarat Govt Brings Ordinance To Align State GST Law With Centre's 2025 Amendments
Gandhinagar: The Bhupendra Patel-led government has issued the Gujarat Goods and Services Tax (Second Amendment) Ordinance, 2025, introducing significant changes to the Gujarat GST Act, 2017. The move seeks to synchronise the state's indirect tax framework with recent amendments enacted by the Finance Act, 2025, following recommendations of the 55th GST Council meeting. As the state legislature is not in session, the ordinance was promulgated under Article 213 of the Constitution, allowing the state to push through urgent legislative updates. One of the standout provisions is the introduction of a new Section 148A, which empowers the government to implement a track-and-trace mechanism for certain categories of goods. This system will require specific items to carry unique identification markings and allow for real-time electronic monitoring across the supply chain. To ensure compliance, a newly inserted Section 122B lays out stringent penalties for violators -- Rs 1 lakh or 10 per cent of the tax due, whichever is greater. The measure is expected to boost supply chain transparency and act as a deterrent to tax evasion. Apart from this, the ordinance introduces technical and procedural updates to key areas of the Act. These include modifications to Input Tax Credit (ITC) rules, credit note regulations, appeals, and several definitional clauses. Amendments have been made to Sections 2, 12, 13, 17, 20, 34, 38, 39, 107, 112, and Schedule III of the Act. In some cases, the changes carry a retrospective effect from July 1, 2017, the date GST was rolled out nationwide. Officials say the amendments are part of a broader effort to harmonise state and central GST provisions, reduce litigation, and improve administrative efficiency. The ordinance will remain in effect until it is ratified by the Gujarat Legislative Assembly in the next session. The Gujarat GST (Second Amendment) Ordinance, 2025, is significant as it aligns the state's tax framework with national GST reforms introduced by the Finance Act, 2025, ensuring legal uniformity and operational consistency across jurisdictions. By introducing a track-and-trace mechanism for certain goods and enforcing electronic traceability, the ordinance aims to curb tax evasion, boost supply chain transparency, and modernise compliance systems. Additionally, retrospective amendments and updates to key sections streamline procedures related to input tax credit, appeals, and credit notes, enhancing administrative efficiency and reducing disputes, making it a crucial step in strengthening Gujarat's tax governance.
Hans India
5 days ago
- Business
- Hans India
Gujarat govt brings ordinance to align state GST law with Centre's 2025 amendments
Gandhinagar: The Bhupendra Patel-led government has issued the Gujarat Goods and Services Tax (Second Amendment) Ordinance, 2025, introducing significant changes to the Gujarat GST Act, 2017. The move seeks to synchronise the state's indirect tax framework with recent amendments enacted by the Finance Act, 2025, following recommendations of the 55th GST Council meeting. As the state legislature is not in session, the ordinance was promulgated under Article 213 of the Constitution, allowing the state to push through urgent legislative updates. One of the standout provisions is the introduction of a new Section 148A, which empowers the government to implement a track-and-trace mechanism for certain categories of goods. This system will require specific items to carry unique identification markings and allow for real-time electronic monitoring across the supply chain. To ensure compliance, a newly inserted Section 122B lays out stringent penalties for violators -- Rs 1 lakh or 10 per cent of the tax due, whichever is greater. The measure is expected to boost supply chain transparency and act as a deterrent to tax evasion. Apart from this, the ordinance introduces technical and procedural updates to key areas of the Act. These include modifications to Input Tax Credit (ITC) rules, credit note regulations, appeals, and several definitional clauses. Amendments have been made to Sections 2, 12, 13, 17, 20, 34, 38, 39, 107, 112, and Schedule III of the Act. In some cases, the changes carry a retrospective effect from July 1, 2017, the date GST was rolled out nationwide. Officials say the amendments are part of a broader effort to harmonise state and central GST provisions, reduce litigation, and improve administrative efficiency. The ordinance will remain in effect until it is ratified by the Gujarat Legislative Assembly in the next session. The Gujarat GST (Second Amendment) Ordinance, 2025, is significant as it aligns the state's tax framework with national GST reforms introduced by the Finance Act, 2025, ensuring legal uniformity and operational consistency across jurisdictions. By introducing a track-and-trace mechanism for certain goods and enforcing electronic traceability, the ordinance aims to curb tax evasion, boost supply chain transparency, and modernise compliance systems. Additionally, retrospective amendments and updates to key sections streamline procedures related to input tax credit, appeals, and credit notes, enhancing administrative efficiency and reducing disputes, making it a crucial step in strengthening Gujarat's tax governance.
