GST Council to discuss early cess termination on October 5
The GST Council is planning to scrap the Compensation Cess by October 31, 2025—months earlier than first announced.
This cess, started in 2017 to help states adjust to GST, was extended after the Centre borrowed a massive ₹2.69 lakh crore during the pandemic for state support.
States worried about losing financial cushion
With the loan expected to be fully repaid by mid-October 2025, there's no legal reason for the cess to continue—any leftover funds (about ₹2,000-3,000 crore) will be split between Centre and states.
Some states like Tamil Nadu and Punjab are worried about losing this financial cushion and want alternatives discussed: either folding these items into regular GST rates or keeping a special levy just for state compensation.
All this is happening as bigger GST reforms are on track for Diwali 2025, aiming to simplify taxes and make things easier for everyone.