CESS in GST is levied under section 8 of The Goods and Services Tax Act, 2017(updated in 2019). CESS on GST can be levied on both intra-state and inter-state supply of some goods or services. It has been designed to compensate for the revenue losses post GST implementation of certain states in India. We will have a look at the rate of GST cess, what it applies to and how to properly calculate it.
What is CESS in GST and how is it used?
Because GST is a consumption-based tax, the state where the consumption of goods happens would be eligible for indirect tax revenue. But since GST eliminated all indirect taxes, some states that rely on the export of goods or services are expected to have a loss of indirect tax revenue.
To compensate for this loss, the compensation CESS in GST has been introduced by the central government until July 2022, as per the goods and services tax act from 2017.
All the revenue that comes from the GST compensation cess will be credited to a non-lapsable fund called the Goods and Services Tax Compensation Fund. The fund would be used for compensating tax revenue loss due to GST to the affected states. Any funds that remain unutilised at the end of the transition period would be shared in half between the Central Government and all State Governments.
What does GST Cess apply to?
GST cess is applied to a variety of goods or services that are traded either intrastate or interstate by GST registered businesses that do not fall under the composition scheme, for the following categories:
Pan Masala
Aerated waters
Tobacco and tobacco products
Coal, briquettes and solid fuels made from coal or ignite
Motor cars and other motor vehicles
Any other supplies as notified from time to time.
A full official list of GST Cess rates can be found here.
A particular case of GST CESS (As of 2019): Kerala Flood CESS
The Kerala flood cess is a tax implemented by the Kerala government on intra-state movement of certain goods and services to the final customers. The tax is applicable from the beginning of August 2019 and will be applied for 2 years, till July 2021. This flood cess has been established to raise the funds required for relief and rehabilitation of those affected by last year’s flood in the state. If you trade in Kerala, read more about this here.
Input Tax Credit from CESS on GST
The input tax credit that comes from the compensation CESS on the supply of goods or services can only be utilised towards the payment of the compensation cess on supply of goods or services.
How to calculate cess on GST?
The value of the CESS rate varies by the type of product. One thing that is good to remember is that CESS is calculated based on the value of the product without GST. In case CESS is applicable to any goods imported into India, then it must be levied and collected along with IGST and customs tax.
Let’s take an example of how GST Cess is calculated.
Company Sorina TEST 123 in Maharashtra supplies 1 car @ 100000 INR to company Ab company in Maharashtra. This is a small diesel car for the company’s use, it has a motor under 1500C so it attracts a 3% CESS rate. The GST rate that applies to motor cars is 28%.
Motor car |
100,000 |
Add GST (CGST+SGST/IGST) @ 28% |
28,000 |
GST Cess @ 3% (10,000*0.03) |
3,000 |
Total |
131,000 |
The invoice that Sorina TEST 123 from Maharashtra issues to Ab Company in Maharashtra is shown below.
You can use Sleek Bill to make invoices just like this one plus many other necessary documents in the GST approved format. GST Cess in invoices made with our gst billing software is easy to add and always correctly calculated, to make your daily business processes easier.
CESS as % & CESS as amount
In Sleek Bill you can add CESS either as a percentage (%), as a fixed amount or both! Your invoices can show the correct ammount of CESS and save you valuable time when completing your GST reports and making sure your clients don't send them back.
GST Cess Rate List
| 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% |
