GST Compensation Cess

GST Cess – Rate, Applicability and Calculation

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GST Cess – Rate, Applicability and Calculation

GST cess is a compensation cess levied under section 8 of The Goods and Services Tax (Compensation to State) Act, 2017. GST cess is levied on intra-state supply of goods or services and inter-state supply of goods or services to provide compensation to the States for loss of revenue due to implementation of GST in India. In this article, we look at the applicability of GST Cess, rate of GST cess and methodology for calculation.

Why GST Cess is Levied?

As GST is a consumption based tax, the state in which the consumption of goods and supply happen would be eligible for the indirect tax revenue. Hence, after GST coming into effect, some states that are net exporter of goods and/or services are expected to experience a decrease in indirect tax revenue.

To compensate the States for the loss in tax revenue, the GST Compensation Cess has been declared by the Central Government. As per the Goods and Services Tax (Compensation to State) Act, 2017, GST compensation cess would be levied for a period of 5 years from GST implementation.

Usage of GST Cess

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. If any funds are unutilised, then at the end of the transition period, it would be shared in half by the Central Government and all State Government. State government’s share would be distributed in the ratio of their total revenues from the State tax or the Union territory goods and services tax, in the last year of the transition period.

Applicability of GST Cess

GST Cess would be applicable on both supply of goods or services that have been notified by the Central Government. Also, both intra-state supplies of goods or services and inter-state supplies of goods or services would attract GST cess. All taxable person under GST, except taxpayers registered under GST composition scheme are expected to collect and remit GST cess. The following goods will attract GST Cess :

  • Pan Masala
  • Tobacco and manufactured tobacco substitutes, including tobacco products
  • Coal, briquettes, ovoids and similar solid fuels manufactured from coal, lignite, whether or not agglomerated, excluding jet, peat (including peat litter), whether or not agglomerated
  • Aerated waters
  • Motor cars and other motor vehicles principally designed for the transport of persons (other than motor vehicles for the transport of ten or more persons, including the driver), including station wagons and racing cars.
  • Any other supplies as notified from time to time.

Calculating GST Cess

In case the goods or service attracts GST cess, cess must be calculated on the basis of the taxable value of the supply and as provided in the GST cess rate schedule. In case GST cess is applicable on goods imported into India, then cess must be levied and collected along with the IGST and customs duty.

For example, if the assessable value of  goods imported into India is Rs. 100/-, GST rate is 18% and customs duty is 10%.

Then IGST tax payable would be calculated as:

Assessable Value= Rs. 100/-
Basic Customs Duty (BCD) = Rs. 10/-
Value for the purpose of levying IGST = Rs. 110/-
GST – Integrated Tax = 18% of Rs.110/- = Rs. 19.80
Total Taxes = Rs. 29.80

If the goods attract GST Compensation Cess, then GST Compensation Cess would be levied on Rs. 110/-, as Compensation Cess is not levied IGST.

Goods Import Procedure under GST

 

GST Cess Rate

Name of Goods or Service

HSN Code

GST Cess

Pan Masala

2106 90 20

60%

Aerated waters, containing added sugar or other sweetening matter or flavoured

Aerated waters

2202 10 10

12%

Lemonade

2202 10 20

12%

Others

2202 10 90

12%

Tobacco and Tobacco Products

Unmanufactured tobacco

bearing a brand name

2401

65%

Tobacco refuse, bearing a brand name

2401 30 00

61%

Chewing tobacco (without lime tube)

2403 99 10

160%

Chewing tobacco (with lime tube)

2403 99 10

142%

Filter khaini

2403 99 10

160%

Jarda scented tobacco

2403 99 30

160%

Pan masala containing tobacco ‘Gutkha’

2403 99 90

204%

Cigarettes

Non- filter
Not exceeding 65 mm

2402 20 10

5% + Rs.1591 per

thousand

Exceeding 65 mm but not 70 mm

2402 20 20

5% + Rs.2876 per

thousand

Filter
Not exceeding 65 mm

2402 20 30

5% + Rs.1591 per

thousand

Exceeding 65 mm but not 70 mm

2402 20 40

5% + Rs.2126 per

thousand

Exceeding 70 mm but not 75 mm

2402 20 50

5% + Rs.2876 per

thousand

Others

2402 20 90

5% + Rs.4170 per

thousand

Other Tobacco Products

Cigar and cheroots

2402 10 10

21% or Rs. 4170

per thousand,

whichever is higher

Cigarillos

2402 10 20

21% or Rs. 4170

per thousand,

whichever is higher

Cigarettes of tobacco substitutes

2402 90 10

Rs.4006 per

thousand

Cigarillos of tobacco substitutes

2402 90 20

12.5% or Rs. 4,006

per thousand

whichever is higher

Other

2402 90 90

12.5% or Rs. 4,006

per thousand

whichever is higher

Hookah’ or ‘gudaku’ tobacco tobacco bearing a

brand name

2403 11 00

72%

Tobacco used for smoking ‘hookah’or ‘chilam’

commonly known as ‘hookah’ tobacco or ‘gudaku’

2403 11 00

17%

Other smoking tobacco not bearing a brand name.

2403 11 90

11%

Smoking mixtures for pipes and cigarettes

2403 19 10

290%

Other smoking tobacco bearing a brand name

2403 19 90

49%

Other smoking tobacco not bearing a brand name

2403 19 90

57%

“Homogenised” or “reconstituted” tobacco bearing a brand name

2403 91 00

72%

Preparations containing chewing tobacco

2403 99 20

72%

Snuff

2403 99 40

72%

Preparations containing snuff

2403 99 50

72%

Tobacco extracts and essence bearing a brand name

2403 99 60

72%

Tobacco extracts and essence not bearing a brand name

2403 99 60

65%

Cut tobacco

2403 99 70

20%

All goods, other than pan masala containing tobacco ‘gutkha’, bearing a brand name

2403 99 90

96%

All goods, other than pan masala containing tobacco ‘gutkha’, not bearing a brand name

2403 99 90

89%

Other Products

Coal; briquettes, ovoids and similar solid fuels

manufactured from coal.

2701

Rs.400 per tonne

Lignite, whether or not agglomerated, excluding

jet

2702

Rs.400 per tonne

Peat (including

agglomerated

2703

Rs.400 per tonne

Motor Vehicles

Motor vehicles (10<persons <13)

8702

15%

Small Cars (length < 4 m ; Petrol<1200 cc )

8703

1%

Small Cars (length < 4 m ; Diesel < 1500 cc)

8703

3%

Mid Segment Cars (engine < 1500 cc)

8703

15%

Large Cars (engine > 1500 cc)

8703

15%

Sports Utility Vehicles (length > 4m ; engine >

1500 cc; ground clearance > 170 mm)

8703

15%

Mid Segment Hybrid Cars (engine < 1500 cc)

8703

15%

Hybrid motor vehicles > 1500 cc

8703

15%

Hydrogen vehicles based on fuel cell tech > 4m

8703

15%

Motorcycles (engine > 350 cc)

8711

3%

Aircrafts for personal use.

8802

3%

Yacht and other vessels for pleasure or sports

8903

3%

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