An Act to provide for compensation to the States for the loss of revenue arising on account of implementation of the GST.
Section
Description
Section 1 Short title, extent and commencement
GST (Compensation to States) Act, 2017 extends to the whole of India and shall come into force on 1st July 2017.
Vide Notification No. 1/2017 GST Compensation dtd 28th June, 2017
Section 2 Definitions
(1) (a) “Central Tax” means the CGST levied and collected under the CGST Act;
(b) “CGST Act” means the CGST Act, 2017;
(c) “Cess” means the GST compensation cess levied U/s – 8;
(d) “Compensation” means an amount, in the form of GST compensation, as determined U/s -7;
(e) “Council” means the GST Council constituted under the provisions of Article 279A of the Constitution.
(f) “Fund” means the GST Compensation Fund referred to in S – 10;
(g) “Input Tax” in relation to a taxable person, means, cess charged on:
(i) any supply of goods or services or both made to him;
(ii) import of goods and includes the cess payable on reverse charge basis;
(h) “IGST Act” means the IGST Act, 2017;
(i) “Integrated Tax” means the IGST levied and collected under the IGST Act;
(j) “Prescribed” means prescribed by rules made, on the recommendations of the Council, under this Act;
(k) “projected growth rate” means rate of growth projected for the transition period as per S – 3;
(l) “Schedule” means the Schedule appended to this Act;
(m) “State” means, for the purposes of sections:
(1) 3 to 7 the States as defined under the CGST Act; and
(2) 8 to 14 the States as defined under the CGST Act and the Union territories as defined
under the UTGST Act;
(n) “State Tax” means the SGST levied and collected under the respective SGST Act;
(o) “SGST Act” means the law to be made by the State Legislature for levy and collection of tax
by the concerned State on supply of goods or services or both;
(p) “Taxable Supply’’ means a supply of goods or services or both which is chargeable to the cess under this Act;
(q) “Transition Date” shall mean, in respect of any State, the date on which the SGST Act of the
concerned State comes into force;
(r) “Transition Period” means a period of 5 years from the transition date; and
(s) “UTGST Act” means the UTGST Act, 2017.
(2) Words and expressions used and not defined in this Act but defined in the CGST Act and the IGST Act shall have the meanings respectively assigned to them in those Acts.
Section 3. Projected growth rate.
Section 4 Base year.
Section 5 Base year revenue.
Section 6 Projected revenue for any year
Section 7 Calculation and release of compensation
Section 8 Levy and collection of cess
1) There shall be levied a cess on such intra- State supplies of goods or services or both, as provided for in S – 9 of the CGST Act, and such inter-State supplies of goods or services or both as provided for in S – 5 of the IGST Act, and collected in such manner as may be prescribed, on the recommendations of the council, for the purposes of providing compensation to the States for loss of revenue arising on account of implementation of the GST with effect from the date from which the provisions of the CGST Act is brought into force, for a period of 5 years or for such period as may be prescribed on the recommendations of the council:
Provided that no such cess shall be leviable on supplies made by a taxable person who has decided to opt for composition levy U/s – 10 of the CGST Act.
(2) The cess shall be levied on such supplies of goods and services as are specified in column (2)
of the Sch, on the basis of value, quantity or on such basis at such rate not exceeding the rate set forth in the corresponding entry in column (4) of the Sch, as the Central Govt may, on the recommendations of the council, by notification in the Official Gazette, specify:
Provided that where the cess is chargeable on any supply of goods or services or both with reference to their value, for each such supply the value shall be determined U/s -15 of the CGST Act for all intra- State and inter-State supplies of goods or services or both:
Provided further that the cess on goods imported into India shall be levied and collected in accordance with the provisions of S – 3 of the Customs Tariff Act, 1975, at the point when duties of customs are levied on the said goods U/s -12 of the Customs Act, 1962, on a value determined under the Customs Tariff Act, 1975.
Section 9 Returns, payments and refunds
(1) Every taxable person, making a taxable supply of goods or services or both, shall-
(a) pay the amount of cess as payable under this Act in such manner;
(b) furnish such returns in such forms, along with the returns to be filed under CGST Act; and
(c) apply for refunds of such cess paid in such form, as may be prescribed.
(2) For all purposes of furnishing of returns and claiming refunds, except for the form to be filed, the provisions of the CGST Act and the rules made there under, shall, as far as may be, apply in relation to the levy and collection of the cess leviable U/s – 8 on all taxable supplies of goods or services or both, as they apply in relation to the levy and collection of central tax on such supplies under the said Act or the rules made there under.
Section 10 Crediting proceeds of cess to Fund
Section 11 Other provisions relating to cess.
(1) The provisions of the CGST Act, & the rules made there under, including those relating to assessment, input tax credit, non-levy, short-levy, interest, appeals, offences and penalties, shall, as far as may be, mutatis mutandis, apply, in relation to the levy & collection of the cess leviable U/s – 8 on the intra- State supply of goods & services, as they apply in relation to the levy & collection of central tax on such intra- State supplies under the said Act or the rules made there under.
(2) The provisions of the IGST Act, and the rules made there under, including those relating to assessment, input tax credit, non-levy, short-levy, interest, appeals, offences and penalties, shall, mutatis mutandis, apply in relation to the levy and collection of the cess leviable U/s – 8 on the inter-State supply of goods and services, as they apply in relation to the levy and collection of integrated tax on such inter-State supplies under the said Act or the rules made there under:
Provided that the input tax credit in respect of cess on supply of goods and services leviable U/s – 8, shall be utilized only towards payment of said cess on supply of goods and services leviable under the said section.
Section 12 Power to make rules.
Section 13 Laying of rules before Parliament.
Section 14 Power to remove difficulties.
Sch
The maximum rate at which GST Compensation cess may be collected
Notification No. 1/2017-Compensation Cess (Rate) dtd 28th June, 2017
In exercise of the powers conferred by S – 8 (2) of the GST (Compensation to States) Act, 2017, the Central Govt, on the recommendations of the council, hereby notifies the rate of cess as specified in column (4) of the Schedule appended to this notification, that shall be levied on the intra- State supplies or inter-State supplies of such goods, the description of which is specified in the corresponding entry in column (3) and falling under the tariff item, subheading, heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said Schedule.
| S. No. | Chapter / Heading / Sub-heading / Tariff item | Description of Goods
|
Rate of GST compensation cess |
| (1) | (2) | (3) | (4) |
| 1. | 2106 90 20 | Pan-masala | 60% |
| 2. | 2202 10 10 | Aerated waters | 12% |
| 3. | 2202 10 20 | Lemonade | 12% |
| 4. | 2202 10 90 | Others | 12% |
| 5. | 2401 | Unmanufactured tobacco (without lime tube) – bearing a brand name | 71%
|
| 6. | 2401 | Unmanufactured tobacco (without lime tube) – bearing a brand name | 65%
|
| 7. | 2401 30 00 | Tobacco refuse, bearing a brand name | 61% |
| 8. | 2402 10 10 | Cigar and cheroots | 21% or Rs. 4170 per thousand, whichever is higher |
| 9. | 2402 10 20 | Cigarillos | 21% or Rs. 4170 per thousand, whichever is higher |
| 10. | 2402 20 10 | Cigarettes containing tobacco other than filter cigarettes, of length not exceeding 65 millimeters | 5% + Rs. 1591 per thousand
|
| 11. | 2402 20 20 | Cigarettes containing tobacco other than filter cigarettes, of length exceeding 65 millimeters but not exceeding 75 millimeters | 5% + Rs. 2876 per thousand
|
| 12. | 2402 20 30 | Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimeters or its actual length, whichever is more) not exceeding 65 millimeters | 5% + Rs. 1591 per thousand
|
| 13. | 2402 20 40 | Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimeters or its actual length, whichever is more) exceeding 65 millimeters but not exceeding 70 millimeters | 5% + Rs. 2126 per thousand
|
| 14. | 2402 20 50 | Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimeters or its actual length, whichever is more) exceeding 70 millimeters but not exceeding 75 millimeters | 5% + Rs. 2876 per thousand
|
| 15. | 2402 20 90 | Other cigarettes containing tobacco | 5% + Rs. 4170 per thousand
|
| 16. | 2402 90 10 | Cigarettes of tobacco substitutes | Rs. 4006 per thousand |
| 17. | 2402 90 20 | Cigarettes of tobacco substitutes | 12.5% or Rs. 4,006 per thousand whichever is higher |
| 18. | 2402 90 90 | Other | 12.5% or Rs. 4,006 per thousand whichever is higher |
| 19. | 2403 11 10 | ‘Hookah’ or ‘gudaku’ tobacco bearing a brand Name | 72%
|
| 20. | 2403 11 10 | Tobacco used for smoking ‘hookah’ or ‘chilam’ commonly known as ‘hookah’ tobacco or ‘gudaku’ not bearing a brand name | 17%
|
| 21. | 2403 11 90 | Other water pipe smoking tobacco not bearing a brand name. | 11%
|
| 22. | 2403 19 10 | Smoking mixtures for pipes and cigarettes | 290% |
| 23. | 2403 19 90 | Other smoking tobacco bearing a brand name | 49% |
| 24. | 2403 19 90 | Other smoking tobacco not bearing a brand name | 11%
|
| 25. | 2403 91 00 | “Homogenised” or “reconstituted” tobacco, bearing a brand name | 72%
|
| 26. | 2403 99 10 | Chewing tobacco (without lime tube) | 160% |
| 27. | 2403 99 10 | Chewing tobacco (with lime tube) | 142% |
| 28. | 2403 99 10 | Filter khaini | 160% |
| 29. | 2403 99 20 | Preparations containing chewing tobacco | 72% |
| 30. | 2403 99 30 | Jarda scented tobacco | 160% |
| 31. | 2403 99 40 | Snuff | 72% |
| 32. | 2403 99 50 | Preparations containing snuff | 72% |
| 33. | 2403 99 60 | Tobacco extracts & essence bearing a brand name | 72% |
| 34. | 2403 99 60 | Tobacco extracts & essence not bearing a brand name | 65%
|
| 35. | 2403 99 70 | Cut tobacco | 20% |
| 36. | 2403 99 90 | Pan masala containing tobacco ‘Gutkha’ | 204% |
| 37. | 2403 99 90 | All goods, other than pan masala containing tobacco ‘gutkha’, bearing a brand name | 96%
|
| 38. | 2403 99 90 | All goods, other than pan masala containing tobacco ‘gutkha’, not bearing a brand name | 89%
|
| 39. | 2701 | Coal; briquettes, ovoids and similar solid fuels manufactured from coal. | Rs. 400 per tonne
|
| 40. | 2702 | Lignite, whether or not agglomerated, excluding jet | Rs. 400 per tonne
|
| 41. | 2703 | Peat (including peat litter), whether or not agglomerated | Rs. 400 per tonne
|
| 42. | 8702 10, 1 [8702 20, 8702 30, 8702 90] | Motor vehicles for the transport of 2 [not more than 13] persons, including the driver | 15%
|
| 43. | 8703 | Motor vehicles cleared as ambulances duly fitted with all the fitments, furniture and accessories necessary for an ambulance from the factory manufacturing such motor vehicles | NIL
|
| 44. | 8703 10 10, 8703 80
|
Electrically operated vehicles, including three wheeled electric motor vehicles. | NIL |
| 45. | 8703 | Three wheeled vehicles | NIL |
| 46. | 8703 | Cars for physically handicapped persons, subject to the following conditions:
a) an officer not below the rank of Deputy Secretary to the Government of India in the Department of Heavy Industries certifies that the said goods are capable of being used by the physically handicapped persons; and b) the buyer of the car gives an affidavit that he shall not dispose of the car for a period of five years after its purchase. |
NIL |
| 47. | 8703 40, 8703 50, | Following Vehicles, with both spark-ignition internal combustion reciprocating piston engine and electric motor as motors for propulsion;
a) Motor vehicles cleared as ambulances duly fitted with all the fitments, furniture and accessories necessary for an ambulance from the factory manufacturing such motor vehicles b) Three wheeled vehicles c) Motor vehicles of engine capacity not exceeding 1200cc and of length not exceeding 4000 mm. Explanation: For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 and the rules made there under. |
NIL
|
| 48. | 8703 60, 8703 70 | Following Vehicles, with both compression – ignition internal combustion piston engine [ dieselor semi diesel ) and electric motor as motors for
propulsion; a) Motor vehicles cleared as ambulances duly fitted with all the fitments, furniture and accessories necessary for an ambulance from the factory manufacturing such motor vehicles b) Three wheeled vehicles c) Motor vehicles of engine capacity not exceeding 1500 cc and of length not exceeding 4000 mm. Explanation.- For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under. |
NIL |
| 49. | 8703 | Hydrogen vehicles based on fuel cell tech and of length not exceeding 4000 mm.
Explanation: For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 and the rules made there under. |
NIL |
| 50. | 8703 21 or 8703 22 | Petrol, Liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven motor vehicles of engine capacity not exceeding 1200 cc and of length not exceeding 4000 mm.
Explanation.- For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 and the rules made there under. |
1%
|
| 51. | 8703 31 | Diesel driven motor vehicles of engine capacity not exceeding 1500 cc and of length not exceeding 4000 mm.
Explanation.- For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 and the rules made there under. |
3%
|
| 52. | 8703 | All goods other than those mentioned at S. Nos. 43 to 51 above | 15%
|
| 53. | 8711 | Motorcycles of engine capacity exceeding 350 cc. | 3% |
| 54. | 8802 | Other aircraft (for example, helicopters, aeroplanes), for personal use. | 3% |
| 55. | 8903 | Yacht and other vessels for pleasure or sports | 3% |
| 56. | Any chapter | All goods other than those mentioned at S. Nos. 1 to 55 above | Nil |
> Explanation:
(1) In this Schedule, “tariff item”, “heading”, “sub-heading” and “Chapter” shall mean respectively a tariff item, heading, sub-heading and Chapter as specified in the First Schedule to the Customs
Tariff Act, 1975.
(2) The rules for the interpretation of the First Schedule to the said Customs Tariff Act, 1975, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification.
(3) For the purposes of this notification, the phrase “brand name” means brand name or trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person.
> This notification shall come into force with effect from the 1st July, 2017.
1 & 2 Corrigendum dated 30th June, 2017
Notification No. 2/2017- Compensation Cess (Rate) dtd 28th June, 2017
In exercise of the powers conferred by S -8 (1) & (2) of the GST (Compensation to States) Act, 2017, the Central Govt, on the recommendations of the council, hereby notifies, that the cess, on the supply of services of description specified in column (2) of the Table below and falling in Chapter, Section, Heading or Group specified in column (3) of the said Table, shall be levied at the rate specified in the corresponding entry in column (4) of the said Table.
| Sl. No. | Description of Services | Chapter, Section, Heading or Group | Rate (in percent)
|
|
(1) |
(2) |
(3) |
(4) |
| 1 | Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration | Chapter 99 | Same rate of cess as applicable on supply of similar goods involving transfer of title in goods |
| 2 | Transfer of right in goods or of undivided share in goods without the transfer of title thereof | Chapter 99 | Same rate of cess as applicable on supply of similar goods involving transfer of title in goods |
| 3 | Any other supply of services | Chapter 99 | Nil |
> Explanation.-
Reference to “Chapter”, “Section”, “Heading” or “Group”, wherever they occur, unless the context otherwise requires, shall mean respectively as “Chapter, “Section” and “Heading” in the scheme of classification of services 1 [annexed to notification No. 11/2017-Central Tax (Rate), published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), dated 28th June, 2017, vide number G.S.R. 690(E), dated 28th June, 2017] .
> This notification shall come into force with effect from 1st July, 2017.
Corrigendum dated 1st July, 2017
NOTIFICATION NO. 2/2017–Compensation Cess dated 1st July, 2017
In exercise of the powers conferred by S – 12 (2) read with S – 11 of the GST d Services Tax (Compensation to the States) Act, 2017 (15 of 2017), the Central Government hereby makes the following rules, namely:-
(1) Short title and commencement
These rules may be called the GST Compensation Cess Rules, 2017 and shall come into force with effect from the 1st July, 2017.
(2) Adaptation of CGST Rules, 2017
(1) The CGST Rules, 2017 shall, mutatis mutandis, apply, subject to the following modifications, namely:-
(a) in rule 1,-
(i) for the words and figures “CGST Rules, 2017”, the words and figures, “GST Compensation Cess Rules, 2017” shall be substituted;
(b) Rules 3 to 7 (Composition Rules) shall be omitted;
(c) Rules 117 to 120 (Transitional Provisions) shall be omitted.
Note: In this Article only the provisions which are relevant from the practice point of view have been dealt with. All the notifications and the rules have been incorporated as on 11/07/2017 in this Article.
The provisions of Sec – 3, 4, 5, 6, 7, 10, 12, 13 & 14 which have minimum application have not been dealt with.
Author Bio
Whether we can claim refund of cess paid on inputs if cess is not chargeable to our product?