The first meeting of the Goods and Service Tax (GST Council) of 2022 started today, June 28, in Chandigarh. The council meeting will be split over two days for the first time since the implementation of the "one nation, one tax" regime in July 2017. This is mainly because of the heavy load of the agenda and the importance of the issues that need to be resolved by the council.
Compensation for states and Union Territories will be a contentious topic at the summit. Several opposition-ruled states are at odds with the Centre over the issue of compensation. Since the Supreme Court declared in May of this year that the GST Council's recommendations are not binding, the council's ability to forge consensus on economic issues will face an additional test at a time when political tensions between the Center and these states are at an all-time high.
By announcing late last week that the compensation cess will continue to be assessed under the GST system for an extension of nearly 4 years, until 2026, the Finance Ministry set the tone for the discussion. The compensating cess would continue to be collected from July 1, 2022, to March 31, 2026, under the GST (Period of Levy and Collection of Cess) Rules, 2022, which were introduced by the notification.
The GST revenues have increased in recent months, but this increase comes after a protracted period of declines, particularly as a result of the pandemic's slowdown.
Under the Goods and Services Tax (Compensation to States) Act, 2017, states were guaranteed compensation for losses resulting from the implementation of the GST regime for 5 years after its rollout at a compounded rate of 14% from the base year 2015–16. (July 2017).