All about GST Compensation Cess

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GST Compensation Cess is an additional cess levied on certain notified goods in addition to GST applicable on it.

GST Compensation Cess also known as GST Cess was introduced to compensate states which are heavy on manufacturing. Due to the implementation of GST many states faced a decrease in revenue as it is a consumption based tax. Thus, states which were manufacture oriented faced a loss in revenue.

To compensate these states, an additional tax by the name GST compensation cess is levied. It is imposed on certain notified goods and revenue collected from it is distributed amongst these states. This Cess will be levied for 5 years from the date of implementation of GST.

Who is liable to collect GST Compensation Cess?

All taxable persons selling the notified goods will be liable to collect and remit the GST compensation cess. GST compensation tax payers have been exempted from it.

Which goods are notified for charging GST Compensation Cess?

The following goods have been notified so far:

  • Pan Masala
    • Tobacco and tobacco products
    • Cigarettes
    • Coal, briquettes, ovoids and similar solid fuels manufactured from coal, lignite excluding jet and peat.
    • Aerated waters
    • Motor vehicles

What is the rate of GST compensation Cess applicable on these goods?

The GST compensation cess rates schedule for the notified goods are available here.

The GST compensation cess rates on cigarettes have been revised with effect from 18.7.2017. The revised rates are available here.

Can avail Input Credit on Cess paid on inward supply of these goods?

Input credit can be availed on GST compensation Cess paid on inward supplies. However, credit of Cess paid can be utilized only for the payment of GST compensation Cess liability.

How is the GST compensation cess calculated?

The Cess is calculated on the transaction value i.e. the price at which the goods are sold. The Cess should be levied in addition to the GST taxes- CGST + SGST in case of intrastate supplies and IGST in case of interstate supplies.

Example:


Here, the cigarettes have been charged an additional cess @ 36% on Rs. 300, since assuming the cigarettes were above 75mm. The cess tobacco is the additional amount charged based on the number of sticks. Here, the rate is Rs. 4.17 per stick. Hence, for a box of 20, the additional tax is 4.17*20= 83.4.

(Please refer to the rate list to find the exact rate applicable to your product. The revised rates for cigarettes are here)

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