GST CESS is close to sunset, but the states seek a safety network via an additional tax

The GOM Group (GOM) on CESS compensation, headed by the Minister of State for the Federation for Finance, recommended that CESS tax by October 31, 2025.

In three rounds of deliberations, GOM took the main questions about the future of CESS and the management of the unexploited funds. It was agreed that any surplus remains in the Cess Cess at the end of the transition period will be shared equally between the center and the states, in line with Article 10 (3) of the GST Law (compensation to countries), 2017.

Countries, including Tamil Nadu, Carnataka and Punjab, urged cautious to completely cancel, noting the risk of expanding financial gaps. In response, GOM suggested two alternatives to the council.

The first option is to merging the goods currently under Cess in the wider GST, with the appropriate rate adjustments to be placed by the council. The second is to continue CESS in the form of an additional tax, dedicated to compensation for countries for revenue losses from the implementation of goods and services tax. Western Bengal has also argued that section 9 of CGST will need an amendment to make this additional tax applicable.

The final decision is now stabilized with the Commodity and Services Tax Council, which will be traded from 3 to 4 September.

Groups of compensation until July 2025 have already had already 50,175 rupees. In current trends, revenues are expected to start to about 88,000 rupees by October 2025.