What is GST Compensation Cess?

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Sakshi Shah

CGST
GST
IGST
SGST

GST Compensation Cess is the cess levied on certain notified goods. It is charged in addition to IGST, CGST and SGST. Further, the provisions for charging GST Cess are listed in the Goods and Services Tax (Compensation to States) Act, 2017.

The purpose of levying GST Cess is to compensate the states that incurred a loss in revenues due to the implementation of the GST Act. Since GST is a consumption-based tax, the state in which the goods or services are consumed would be eligible for the revenue from GST.

Thus, the manufacturing states i.e. Gujarat, Haryana, Karnataka, Maharashtra and Tamil Nadu would lose their revenue. As a result, GST Compensation Cess was introduced to distribute its revenue amongst the manufacturing states.

Features of GST Compensation Cess

What is Input Tax Credit (ITC) under GST?
Read about meaning of Input Tax Credit, utilisation of ITC and how to view ITC balance on GST Portal
Read More
What is Input Tax Credit (ITC) under GST?
Read about meaning of Input Tax Credit, utilisation of ITC and how to view ITC balance on GST Portal
Read More

FAQs

Can I claim credit of GST Compensation Cess paid on purchases?

Yes, taxpayer can claim Input Tax Credit of the GST Compensation Cess paid on inward supplies or purchases. However, the taxpayer can adjust Input Tax Credit of Cess against Output tax liability of Cess only. Taxpayer cannot adjust ITC of Cess with output tax liability of IGST, CGST, SGST or UTGST.

Which goods will attract GST Compensation Cess?

* Sin Goods such as Cigarattes and Pan Masala
* Other Goods such as Aerated Drinks, Coal, motor vehicles with specified engine capacity
You can refer the entire list on cbic.gov.in

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