The Goods and Services Tax (GST) Council has set up a 10-member GoM, headed by Minister of State for Finance Pankaj Chaudhary, to decide on the future of compensation cess.

The Group of Ministers (GoM), which includes members from Assam, Chhattisgarh, Gujarat, Karnataka, Madhya Pradesh, Punjab, Tamil Nadu, Uttar Pradesh and West Bengal, will submit its report to the Council by December 31.

“The Terms of Reference of the GoM is to make taxation proposal to replace compensation cess after its abolition,” the GST Council Secretariat said in an office memorandum.

In the GST regime, compensation cess is levied on luxury, sin and demerit goods over and above the 28% tax. The proceeds from the cess, which was originally planned for five years after GST rollout or till June 2022, was used to compensate states for GST revenue loss.

Since the government had borrowed Rs 2.69 lakh crore in fiscals 2021 and 2022 to make good states’ revenue loss during COVID years, the GST Council had then decided to extend the compensation cess levy till March 2026 to repay the loan and interest.

The 10-member GoM would now suggest the future of compensation cess.