Meaning of Cess Under GST
GST Cess is an additional indirect tax that has been introduced through the GST (Compensation to States) Act, 2017.
GST Cess is charged only on the supply of notified/selected goods and services. The Cess would be in addition to the normal GST rates. You can get GST rate- Here.
Broadly there are 6 supplies on which GST cess applies. These are:
- Pan Masala
- Prescribed water
- Tobacco and related products
- Minerals
- Vehicles
- Specified services
🙄 So, Why GST Cess is Levied?
Previously in the VAT regime, sales tax (VAT) was collected by the state Govt. from which supplies were made.
Say, Mr.Ram of West Bengal supplies good to Bihar. In this case, West Bengal Govt. would have collected CST from Mr.Ram. Bihar will get nothing from this transaction.
After the implementation of GST, taxes are getting apportioned between the Centre and the states in which consumption takes place.
In the above case, after the implementation of GST, Mr Ram will pay IGST. This IGST will get apportioned between Centre and Bihar (Consuming state). West Bengal will get nothing from this transaction.
In order to compensate the supplying state (WB in above case) from revenue loss, GST (Compensation to States) Act, 2017 was introduced. Supplying states have been guaranteed 14% p.a revenue growth for the next 5 years.
Clean Environmental Cess on coal will be replaced by GST Compensation Cess.
🙄 Who will collect GST Cess?
Every taxable person under GST supplying prescribed goods or services or both shall collect GST Cess at a prescribed rate.
Composite Dealers are not required to collect GST Cess.
💡 How GST Cess is Calculated?
GST cess rate shall be levied on prescribed supplies of goods and services, on the basis of value, quantity or on the prescribed basis at the prescribed rate.
GST cess on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975, at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962, on a value determined under the Customs Tariff Act, 1975.
Example: D S Ltd, a manufacturer of Pan Masala, sell Rajni Gandha of Rs.10,000 (excl.GST) to a dealer. GST rate of Pan Masala is 28% and GST cess rate is 60%. Do the GST Cess Calculation?
Solution: The total bill amount after GST and cess will be Rs.18,800/-.
| Pan Masala | 10000 |
| Add | |
| GST (CGST+SGST/IGST) @ 28% | 2800 |
| GST Cess @ 60% (10000*0.6) | 6000 |
| Total | 18800 |
Qes: Can I avail ITC of Cess paid on inward supplies?
Ans: Yes, ITC of cess paid on inward supply can be availed. But it should be availed against the payment of Cess liability only.
Refund: Input Credit [ITC] of Compensation Cess
A person making zero rate supply can claim the refund of input compensation cess even if the final product is not leviable to cess. [Section 16(3)(a) IGST]
Refund will be available only in the case of export made under bond or Letter of Undertaking [LOU].
Example:
SM Steel, an exporter of Spong Iron, pay cess on coal which is an input for the manufacture of Spong Iron.
In this case, SM Steel can claim the refund of unutilised input tax credit (including compensation cess), if it exports Iron under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed.
If the entity export Iron on payment of integrated tax than it can claim the refund of only the paid IGST.
💡 GST Cess Rates
| Sl no | HSN Code | Description of Goods | Rate of GST compensation cess % | ||
| 1 | 2106-90-20 | Pan-masala | 60 | ||
| Prescribed Water | |||||
| 2 | 2202-10-10 | Aerated waters | 12 | ||
| 3 | 2202-10-20 | Lemonade | 12 | ||
| 4 | 2202-10-90 | Others | 12 | ||
| Tobacco and related products | |||||
| 5 | 2401 | Unmanufactured tobacco (without lime tube) – bearing a brand name | 71 | ||
| 6 | 2401 | Unmanufactured tobacco (with lime tube) – bearing a brand name | 65 | ||
| 7 | 2401-30-00 | Tobacco refuse, bearing a brand name | 61 | ||
| 8 | 2402-10-10 | Cigar and cheroots | 21% or Rs. 4170 per thousand, whichever is higher | ||
| 9 | 2402-10-20 | Cigarillos | 21% or Rs. 4170 per thousand, whichever is higher | ||
| 10 | 2402-20-10 | Cigarettes containing tobacco other than filter cigarettes, of length, not exceeding 65 millimetres | 5% + Rs. 2076 per thousand | ||
| 11 | 2402-20-20 | Cigarettes containing tobacco other than filter cigarettes, of length exceeding 65 millimetres but not exceeding 75 millimetres | 5%+ Rs. 3668 per thousand | ||
| 12 | 2402-20-30 | Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimetres or its actual length, whichever is more) not exceeding 65 millimetres | 5% + Rs. 2076 per thousand | ||
| 13 | 2402-20-40 | Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimetres or its actual length, whichever is more) exceeding 65 millimetres but not exceeding 70 millimetres | 5% + Rs. 2747 per thousand | ||
| 14 | 2402-20-50 | Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimetres or its actual length, whichever is more) exceeding 70 millimetres but not exceeding 75 millimetres | “5% + Rs. 3668 per thousand | ||
| 15 | 2402-20-90 | Other cigarettes containing tobacco | 36% + Rs. 4170 per thousand | ||
| 16 | 2402-90-10 | Cigarettes of tobacco substitutes | Rs.4006 per thousand | ||
| 17 | 2402-90-20 | Cigarillos of tobacco substitutes | 12.5% or Rs. 4,006 per thousand whichever is higher | ||
| 18 | 2402-90-90 | Others | 12.5% or Rs. 4,006 per thousand whichever is higher | ||
| 19 | 2403-11-10 | Hookah’ or ‘gudaku’ tobacco bearing a brand name | 72 | ||
| 20 | 2403-11-10 | Tobacco used for smoking ‘hookah’ or ‘chilam’ commonly known as ‘hookah’ tobacco or ‘gudaku’ not bearing a brand name | 17 | ||
| 21 | 2403-11-90 | Other water pipe smoking tobacco not bearing a brand name. | 11 | ||
| 22 | 2403-19-10 | Smoking mixtures for pipes and cigarettes | 290 | ||
| 23 | 2403-19-90 | Other smoking tobacco bearing a brand name | 49 | ||
| 24 | 2403-19-90 | Other smoking tobacco not bearing a brand name | 11 | ||
| 25 | 2403-91-00 | “Homogenised” or “reconstituted” tobacco, bearing a brand name | 72 | ||
| 26 | 2403-99-10 | Chewing tobacco (without lime tube) | 160 | ||
| 27 | 2403-99-10 | Chewing tobacco (with lime tube) | 142 | ||
| 28 | 2403-99-10 | Filter khaini | 160 | ||
| 29 | 2403-99-20 | Preparations containing chewing tobacco | 72 | ||
| 30 | 2403-99-30 | Jarda scented tobacco | 160 | ||
| 31 | 2403-99-40 | Snuff | 72 | ||
| 32 | 2403-99-50 | Preparations containing snuff | 72 | ||
| 33 | 2403-99-60 | Tobacco extracts and essence bearing a brand name | 72 | ||
| 34 | 2403-99-60 | Tobacco extracts and essence not bearing a brand name | 65 | ||
| 35 | 2403-99-70 | Cut tobacco | 20 | ||
| 36 | 2403-99-90 | Pan masala containing tobacco ‘Gutkha’ | 204 | ||
| 37 | 2403-99-90 | All goods, other than pan masala containing tobacco ‘gutkha’, bearing a brand name | 96 | ||
| 38 | 2403-99-90 | All goods, other than pan masala containing tobacco ‘gutkha’, not bearing a brand name | 89 | ||
| Minerals | |||||
| 39 | 2701 | Coal; briquettes, ovoids and similar solid fuels manufactured from coal | Rs.400 per tonne | ||
| 40 | 2702 | Lignite, whether or not agglomerated, excluding jet | Rs.400 per tonne | ||
| 41 | 2703 | Peat (including peat litter), whether or not agglomerated | Rs.400 per tonne | ||
| Vehicles | |||||
| 42 | 8702-10/8702-20/8702-30/8702-90 | Motor vehicles for the transport of not more than 13 persons, including the driver | 15 | ||
| 43 | 8703-21 / 8703-22 | Petrol, Liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven motor vehicles of engine capacity not exceeding 1200cc and of length not exceeding 4000 mm | 1 | ||
| 44 | 8703 | Motor vehicles of engine capacity not exceeding 1500 cc | 17 | ||
| 45 | 8703 | Motor vehicles of engine capacity exceeding 1500 cc | 20 | ||
| 46 | 8703 | Motor vehicles of engine capacity exceeding 1500 cc, popularly known as Sports Utility Vehicles (SUVs) including utility vehicles | 22 | ||
| 44 | 8703-31 | Diesel driven motor vehicles of engine capacity not exceeding 1500 cc and of length not exceeding 4000 mm | 3 | ||
| 45 | 8711 | Motorcycles of engine capacity exceeding 350 cc. | 3 | ||
| 46 | 8802 | Other aircraft (for example, helicopters, aeroplanes), for personal use | 3 | ||
| 47 | 8803 | Yacht and other vessels for pleasure or sports | 3 | ||
| Specified Services | |||||
| 48 | Chap 99 | Transfer of the right to use any goods | Cess rate on supply of such goods involving transfer of title in goods | ||
| 49 | Chap 99 | Transfer of right in goods or of undivided share in goods without the transfer of title thereof | Cess rate on supply of such goods involving transfer of title in goods | ||
| 50 | Chap 99 | Leasing of motor vehicles purchased and leased prior to 1st July 2017 | 65% of Cess rate on supply of such goods involving transfer of title in goods | ||
Sources:
- Notification no 01/2017- CC
- Notification no 02/2017- CC
- Notification no 03/2017- CC
- Notification no 05/2017- CC
- Notification no 06/2017- CC
- GST (Compensation to States) Act, 2017
Also Read:
About Author
Pravin Giri
(@Pravin) Twitter | FacebookPravin is a Qualified Chartered Accountant [CA]. Gives opinions on Income tax, GST, and finance.Find him on Twitter @Pravinkumargiri
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