Why GST CESS is levied: Things to know about rates & applicability

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Section 8 of The Goods and Services Tax (Compensation to State) Act, 2017, It is a compensation cess which is levied on the supply of intra-state goods and services. Also, the supply of inter-state goods and services is included in this cess. It has been designed to offer compensation for the loss of revenue which the states have to face due to the implementation of the new taxation GST.

Why GST Cess Gets Levied?

Because this is a compensation based tax, states where the goods and supply consumptions occur would be able to get the benefits of this tax. Therefore, after GST getting active in the nation, the net exporters are said to experience a drop in an indirect tax system.

Central Government has declared the implementation of GST cess to help to recover losses in the tax revenue. According to the GST Act, this cess implementation would be effective for a five year period from the day of GST implementation.

GST Cess – The Usage

The proceeds that would come from GST cess would get credited to a non-lapsable fund. This one is known as GST compensation fund which would be used to compensate the states for the loss of tax revenue. In case, any amount credited to the fund remains unutilized, the amount would be divided between the central and the state after a period.

The Applicability

The cess would be applied on goods and the services both. However, the centre would have to notify regarding the same. Additionally, both intra and inter state goods and services supply would draw this cess. Any taxable person apart from the one registered under GST composition would be able to collect GST cess.

Pan masala, tobacco products, a solid fuel made from coal, motor cars and aerated waters would come under GST cess.

The GST Calculation

The cess needs to be calculated based on the taxable value of supply. Also, it can be calculated by the GST cess rate list.

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Aditi Ghosh
Aditi is a marketing consultant and full-time author at The GST Blog. Content marketing and social media promotion are one of her specialties. When she is not working, Aditi turns to her writing skill and offers promotional tips or information to the readers.

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