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With reference to Goods and Services Tax (GST) Compensation Cess, consider the following statements:
- It is levied on all products produced in the country.
- Any unused money from the compensation fund will be credited to the Public Account of India.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'D'. Can you explain this answer?
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With reference to Goods and Services Tax (GST) Compensation Cess, cons...
- Several manufacturing states, including Gujarat, Maharashtra, Karnataka, Haryana, and Tamil Nadu, were concerned about potential revenue loss due to the consumption-based nature of the GST. To address these concerns, the government introduced the GST Compensation Cess, designed to offset any potential revenue losses incurred by these manufacturing states.
- In accordance with the GST (Compensation to States) Act of 2017, a compensation cess is imposed on five goods that are deemed to be “sin” or “luxury,” such as Pan Masala, Tobacco, and Automobiles. Hence statement 1 is not correct.
- It has to be paid by all the taxpayers except those who export the notified goods and those who have opted for the GST composition scheme.
- Any unused money from the compensation fund at the end of the transition period shall be distributed between the states and the center as per any applicable formula. Hence statement 2 is not correct.
- All the proceeds received from the GST compensation cess would be credited to a non-lapsable fund known as the Goods and Services Tax Compensation Fund. The funds would then be used for compensating tax revenue loss to States on account of GST implementation.
- The government has extended the time for levy of GST compensation cess by nearly 4 years till March 31, 2026. The levy of cess was to end on June 30, 2022, but the GST Council, chaired by Union Finance Minister and comprising state FMs, decided to extend it till March 2026 to repay the loans taken in the last two fiscal years to make up for the shortfall in their revenue collection.
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With reference to Goods and Services Tax (GST) Compensation Cess, cons...
Explanation:
Statement 1: It is levied on all products produced in the country.
- This statement is incorrect. GST Compensation Cess is not levied on all products produced in the country. It is a special tax levied on certain goods and services to compensate states for any revenue loss due to the implementation of GST.
Statement 2: Any unused money from the compensation fund will be credited to the Public Account of India.
- This statement is correct. Any unused money from the GST Compensation Cess fund will be credited to the Public Account of India. The fund is maintained to compensate states for revenue loss, and any surplus amount not utilized for this purpose will be transferred to the Public Account of India.
Therefore, the correct answer is option 'D' - Neither 1 nor 2.
Statement 1: It is levied on all products produced in the country.
- This statement is incorrect. GST Compensation Cess is not levied on all products produced in the country. It is a special tax levied on certain goods and services to compensate states for any revenue loss due to the implementation of GST.
Statement 2: Any unused money from the compensation fund will be credited to the Public Account of India.
- This statement is correct. Any unused money from the GST Compensation Cess fund will be credited to the Public Account of India. The fund is maintained to compensate states for revenue loss, and any surplus amount not utilized for this purpose will be transferred to the Public Account of India.
Therefore, the correct answer is option 'D' - Neither 1 nor 2.
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With reference to Goods and Services Tax (GST) Compensation Cess, consider the following statements: It is levied on all products produced in the country. Any unused money from the compensation fund will be credited to the Public Account of India.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'D'. Can you explain this answer?
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