New Delhi, June 16 -- The GST Council could consider a proposal at its next meeting to replace the existing compensation cess on sin goods and luxury items such as coal, cigarettes and cars with two different levies, a health cess and a clean energy cess, after March 31, 2026, people in the know said. There is a "near consensus" among officials and experts advising the Group of Ministers (GoM) deliberating the fate of the compensation cess after the levy is abolished, they said, requesting anonymity. A majority of advisers want the cess on luxury items like cars to continue for funding clean energy initiatives. Similarly, they want existing levies on sin goods such as tobacco products to continue, in order to support health schemes, the people mentioned above said. "The GoM has almost finalised its recommendations on similar lines and the same are expected to be placed before the Council soon, which is the final authority," one of them said. The GoM on restructuring of the compensation cess was constituted at the Council's 54th meeting in September last year. It is chaired by Union minister of state for finance Pankaj Chaudhary. The GST Council, the apex decision-making body on the indirect tax regime, is expected to meet either in June-end or July, before the Monsoon Session of Parliament, they said. The federal body, comprising the Union finance minister and finance ministers (or senior ministers) of states, has not met since December 2024, and may consider cess-related proposals along with other matters such as GST rate rationalisation and further ease of compliance, the people cited above said. HT on June 5 reported about GST rate rationalisation as it said the Council may take up removal of the 12% rate. Experts say clarity on the compensation cess is a must for businesses to plan in advance. Saurabh Agarwal, tax partner at EY India said: "The expected shift from the GST compensation cess to other cesses like health or energy cess is an expected development. While the industry is keenly watching for a potential reduction in effective tax rates on affected commodities, the immediate focus will be on understanding the specifics of these new cesses," he said. "It will be crucial to see how these funds are earmarked for specific developmental goals and how that aligns with the sectors they are levied upon. Furthermore, if there is a reduction in overall tax rates, the anti-profiteering provisions will be a critical area to monitor, requiring businesses to carefully factor these changes into their pricing strategies to ensure the benefits are passed on to consumers," he added. At the time of launching the GST regime, the law assured states of a 14% increase in their annual revenue for five years of the transition period from July 1, 2017 to June 30, 2022, and also guaranteed that their revenue shortfall, if any, would be made good through a compensation cess levied on luxury goods and sin products such as liquor, cigarettes, other tobacco products, aerated water, automobiles, and coal. The GST compensation cess was, however, extended from June 30, 2022 to March 31, 2026, only to retire debts taken on behalf of states to meet their revenue shortfall. While states have no claims for compensation from July 1, 2022, the cess continues till March 31, 2026 to service the back-to-back loans released to states when compensation cess collection fell in 2020 and 2021 because of a slump due to the Covid-19 pandemic....