GST Cess Guide - what is CESS in GST?

GST cess is a compensation cess levied on certain goods or services
to provide compensation to states for loss of revenue due to the GST implementation and other reasons.

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.

GST Invoice with Cess

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 Sleek Bill 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 % and amount

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%




GST Explained


GST, short for Goods and Services tax, is a new tax that will be imposed on the sale and purchase of goods and services in India. GST is meant to replace all taxes in India with a single unified tax applied to value addition instead of the total value of the product at each stage in the supply chain.

This method provides credit for the input tax paid on the purchase of goods and services, which can be offset with the tax to be paid on the supply of goods and services. As a result, this reduces the overall manufacturing cost, with the end customer paying less.

Read More

With certain current taxes remaining, the following goods and services will be fully or partially exempted from the GST

Read More

Free movement of goods: Business owners will be able to sell more in other states without having to worry about interstate transaction costs. With GST, the entry tax will be eliminated, which will save time and money spent.

Read More

Currently, there are many indirect taxes that both the state and central governments are collecting on every purchase and sale.

Read More

The GST will follow a similar model with the one before it

Read More

GST will have a 4-tier tax structure

Read More

One of the main reasons for GST being introduced in India is the tax burden that falls both on companies and consumers. With the current tax system, there are multiple taxes added at each stage of the supply chain, without taking credit for taxes paid at previous stages. As a result, the end cost of the product does not clearly show the actual cost of the product and how much tax was applied. This cascading structure is too complex and inefficient.

Read More

For inter-state transactions, the Centre will levy Integrated GST (IGST), which is equal to the average of the CGST and SGST rates. After applying IGST, CGST and SGST credits received from purchases, the seller will then pay the remaining IGST on the added value.

Read More

Businesses with turnover revenue of 20 lakhs and above will have to register and file for GST returns, with a threshold of 10 lakhs for businesses in the north east and hill states.

Read More

A combination of CGST and SGST will be applied to the import of goods and services that come to India. Tax benefits and credits will be given to the state where the imported goods and services are consumed.

Read More

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