What is GST Compensation Cess in GST

Cess is an Additional Tax which is charged on some goods

It is charged on some luxury items like

Pan Masala

Cigarettes

Aerated waters(Cold Drinks)

Motor Vehicles etc

 

Example 1

Local Sales of Item with 28% GST Local Sales of Item with 28% GST+17% CESS
PARTICULARS AMT PARTICULARS AMT
SALES 100000 SALES 100000
CGST 14% 14000 CGST 14% 14000
SGST 14% 14000 SGST 14% 14000
    CESS 17% 17000
TOTAL 128000 TOTAL 145000

 

Example 2

Interstate Sales of Item with 28% GST Interstate Sales of Item with 28% GST+17% CESS
PARTICULARS AMT PARTICULARS AMT
SALES 100000 SALES 100000
IGST 28% 28000 IGST 28% 28000
    CESS 17% 17000
       
TOTAL 128000 TOTAL 145000

 

Why GST Compensation Cess was introduced?

Maximum GST Rate is 28%

However on certain items ,more rate was charged under VAT

Hence some certain manufacturing states like Maharashtra Revenue faced loss in revenue

So in order to compensate them,this GST Compensation Cess is introduced

 

Whether Input Tax Credit of this Cess Available

Yes

Input is available but it can be utilized against output of CESS only

It cannot be adusted against CGST,SGST,IGST or vice versa

 

Q1 -

Local Purchase of Goods 100000
18% GST+22% CESS Extra  
   
Local SALE OF GOODS 70000
18% GST+22% CESS Extra  
   
What is GST Payable/credit  

Answer

Local Purchases of Item with 18% GST+22% Cess extra   Local Sales of Item with 18% GST+22% Cess extra
           
PARTICULARS AMT     PARTICULARS AMT
PURCHASES 100000     SALES 70000
CGST 9% 9000     CGST 9% 6300
SGST 9% 9000     SGST 9% 6300
CESS 22% 22000     CESS 22% 15400
           
TOTAL 140000     TOTAL 98000

 

PARTICULARS CGST SGST CESS
OUTPUT 6300 6300 15400
INPUT 9000 9000 22000
GST CREDIT 2700 2700 6600
  1. GST - Goods and Services Tax, India
  2. GST Computation & Accounting

About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 10 years. He also provides Accounts Tax GST Training in Delhi and Pune.