The Group of Ministers (GoM) on compensation cess remains divided over the mechanism for replacing the levy, according to sources. The panel is likely to propose two alternatives for consideration.
One option is to continue the cess in the form of an additional levy to compensate states for revenue losses. The other suggestion is to allocate an appropriate GST rate for items currently under cess, without imposing any additional levy, sources said.
Assam, Chhattisgarh, Gujarat, Madhya Pradesh and Uttar Pradesh favour the proposal to allocate a GST rate without an additional tax. West Bengal, Tamil Nadu, Punjab and Karnataka support the continuation of cess via an additional levy.
The GoM is also expected to propose that additional collections under the cess, amounting to ₹1,880 crore, be divided equally between the Centre and the states in a 50:50 ratio, as per Section 10(3) of the GST Act, 2017.
The panel is likely to recommend that the levy of compensation cess end by October 31.
