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GST Compensation Cess

GST Compensation Cess :

♦ Some States, particularly producing States like Maharashtra, Gujarat, Tamil Nadu, Punjab, Karnataka will lose tax revenue due to abolition of Central Sales Tax.

♦ Such States will be paid compensation by Central Government for five years.

♦ To enable Central Government to pay the compensation, a GST Compensation Cess is proposed to be levied on supply of goods or services or both within India and also on import of goods and services.

♦ Sections 3 to 7 of GST Cess Act provide for mode of calculating compensation payable to States.

♦ Input Tax Credit of GST Compensation Cess will be available, but the input tax credit in respect of GST Compensation Cess can be utilised only towards payment of GST Compensation Cess.

♦ Broadly, maximum GST Cess rates are as follows – (a) Pan Masala – 150% (b) Tobacco and tobacco products – Rs 4,170 rupees per thousand sticks or 290% ad valorem or a combination thereof (c) Coal, briquettes, ovoids and similar solid fuels manufactured from coal – Rs 400 per tonne (d) Aerated waters – 15% (e)Motor cars and motor vehicles for transport of less than ten persons, including drive and also on station wagons and racing cars – 15%.

♦ Actual rate of GST Compensation Cess is expected to be 12% (where 15% maximum is applicable). Other goods and all services are most likely to be exempted from GST compensation Cess.