Expert insights on CESS compensation 12% rate slab removal by Shivashish Karnani, GST Division, DPNC Global
Below the Expert insights on CESS compensation 12% rate slab removal by Shivashish Karnani, GST Division, DPNC Global
On Compensation CESS continuation:
"The continuation of compensation cess beyond its original timeline reflects the harsh reality of India's federal fiscal dynamics and the ongoing revenue pressures faced by states. While this extension provides much needed financial certainty to state governments, it also means that consumers and businesses will continue bearing this additional tax burden for an extended period. The GST Council should use this extension period to implement comprehensive measures that boost organic GST collections including better compliance mechanisms, technology upgrades, and anti-evasion measures. More importantly, we need a clear, time bound roadmap for phasing out this cess as GST revenues mature. The goal should be to make GST collections self-sustaining without relying on these supplementary levies, thereby truly delivering on the promise of a simplified indirect tax regime."
Removal of 12% rate
"This would be a significant step toward the long awaited GST rate rationalization. Eliminating the 12% slab could simplify the tax structure by creating clearer demarcations between essential goods at 5% and standard goods at 18%. However, the challenge lies in determining where current 12% items will be repositioned ,moving them to 18% could increase consumer burden, while shifting to 5% may impact revenue collections. The council will need to carefully balance revenue neutrality with compliance simplification."
On CBIC registration instructions to be followed by state govts
"Aligning state GST registration procedures with the recently streamlined CBIC instructions would be a game changer for businesses, particularly those operating in multiple states. Uniform norms would mean faster registration, fewer technical rejections, and smoother PAN-India operations for businesses."
Zero-Rated for Intermediary Services:
"Classifying broker, agent, and digital platform services as exports is a progressive move that could boost India's services exports competitiveness. This change acknowledges the evolving digital economy and could position India as a more attractive destination for global service providers. By making these services zero-rated, it would relieve service providers from GST burdens, significantly improving working capital flow. This move will also lead to end of litigations revolving around issue of exports vs intermediary services. It is important to emphasis that due foreign exchange should be realised by these intermediaries to enjoy the benefits of zero rate."
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