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GST-Compensation-Cess

GST Cess – Rate, Applicability and Calculation

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 is GST Cess 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

GST Cess would be applicable to both the 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 is 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.

How to Calculate

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/-, the 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.

GST Cess
Goods Import Procedure under GST

GST Cess Rate

Name of Goods or ServiceHSN CodeGST Cess
Pan Masala2106 90 2060%

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

Aerated waters2202 10 1012%
Lemonade2202 10 2012%
Others2202 10 9012%

Tobacco and Tobacco Products

Unmanufactured tobacco bearing a brand name240165%
Tobacco refuse, bearing a brand name2401 30 0061%
Chewing tobacco (without lime tube)2403 99 10160%
Chewing tobacco (with lime tube)2403 99 10142%
Filter khaini2403 99 10160%
Jarda scented tobacco2403 99 30160%
Pan masala containing tobacco ‘Gutkha’2403 99 90204%

Cigarettes

Non-filter  
Not exceeding 65 mm2402 20 10

5% + Rs.1591 per

thousand

Exceeding 65 mm but not 70 mm2402 20 20

5% + Rs.2876 per

thousand

Filter  
Not exceeding 65 mm2402 20 30

5% + Rs.1591 per

thousand

Exceeding 65 mm but not 70 mm2402 20 40

5% + Rs.2126 per

thousand

Exceeding 70 mm but not 75 mm2402 20 50

5% + Rs.2876 per

thousand

Others2402 20 90

5% + Rs.4170 per

thousand

Other Tobacco Products

Cigar and cheroots2402 10 1021% or Rs. 4170 per thousand, whichever is higher
Cigarillos2402 10 20

21% or Rs. 4170

per thousand,

whichever is higher

Cigarettes of tobacco substitutes2402 90 10Rs.4006 per thousand
Cigarillos of tobacco substitutes2402 90 2012.5% or Rs. 4,006 per thousand whichever is higher
Other2402 90 9012.5% or Rs. 4,006 per thousand whichever is higher

Hookah’ or ‘gudaku’ tobacco bearing a

brand name

2403 11 0072%

Tobacco used for smoking ‘hookah’ or ‘chilam’

commonly known as ‘hookah’ tobacco or ‘gudaku’

2403 11 0017%
Other smoking tobacco not bearing a brand name.2403 11 9011%
Smoking mixtures for pipes and cigarettes2403 19 10290%
Other smoking tobacco bearing a brand name2403 19 9049%
Other smoking tobacco not bearing a brand name2403 19 9057%
“Homogenised” or “reconstituted” tobacco bearing a brand name2403 91 0072%
Preparations containing chewing tobacco2403 99 2072%
Snuff2403 99 4072%
Preparations containing snuff2403 99 5072%
Tobacco extracts and essence bearing a brand name2403 99 6072%
Tobacco extracts and essence not bearing a brand name2403 99 6065%
Cut tobacco2403 99 7020%
All goods, other than pan masala containing tobacco ‘gutkha’, bearing a brand name2403 99 9096%
All goods, other than pan masala containing tobacco ‘gutkha’, not bearing a brand name2403 99 9089%

Other Products

Coal; briquettes, ovoids and similar solid fuels manufactured from coal.2701Rs.400 per tonne
Lignite, whether or not agglomerated, excluding jet2702Rs.400 per tonne
Peat (including agglomerated)2703Rs.400 per tonne

Motor Vehicles

Motor vehicles (10<persons <13)870215%
Small Cars (length < 4 m ; Petrol<1200 cc )87031%
Small Cars (length < 4 m ; Diesel < 1500 cc)87033%
Mid Segment Cars (engine < 1500 cc)870315%
Large Cars (engine > 1500 cc)870315%
Sports Utility Vehicles (length > 4m ; engine > 1500 cc; ground clearance > 170 mm)870315%
Mid Segment Hybrid Cars (engine < 1500 cc)870315%
Hybrid motor vehicles > 1500 cc870315%
Hydrogen vehicles based on fuel cell tech > 4m870315%
Motorcycles (engine > 350 cc)87113%
Aircraft for personal use.88023%
Yacht and other vessels for pleasure or sports89033%

 

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