Seeks to amend Notification 01/2025- Compensation Cess Tax (Rate), to prescribe GST rates on tobacco products.
The Central Government, on the recommendations of the GST Council, issued Notification No. 03/2025–Compensation Cess (Rate) dated 31 December 2025 to amend Notification No. 1/2017–Compensation Cess (Rate), exercising powers under Section 8(2) of the GST (Compensation to States) Act, 2017. Through this notification, the Government has comprehensively amended the Schedule to the compensation cess notification by substituting the rate of compensation cess as “Nil” across a wide range of serial numbers covering tobacco and tobacco-related products. The amendment applies to numerous tariff entries listed under S. Nos. 1 to 38 (including several sub-entries such as 1A, 5A, 6A, 7A, up to 36E and 38), effectively resetting the compensation cess rate to Nil for the specified goods under column (4) of the Schedule. This change represents a significant recalibration of the compensation cess structure applicable to tobacco products, which historically attracted compensation cess in addition to GST. The notification clarifies that the amendments shall come into force from 1 February 2026, providing certainty on the effective date for implementation. The notification also records that the principal notification was last amended in September 2025, indicating a continued policy review of cess rates. While the notification does not itself prescribe new positive rates, it operationally removes the compensation cess levy for the specified entries by substituting “Nil,” thereby altering the tax incidence on tobacco products under the compensation cess framework. The measure reflects the Government’s authority to modify cess rates through notification and underscores the importance for taxpayers and industry participants to reassess pricing, compliance, and reporting positions from the notified effective date.
MINISTRY OF FINANCE
(Department of Revenue)
Notification No. 03/2025-Compensation Cess (Rate) | Dated: 31st December, 2025
G.S.R. 945(E).— In exercise of the powers conferred by sub-section (2) of section 8 of the Goods and Services Tax (Compensation to States) Act, 2017 (15 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following further amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 1/2017-Compensation Cess (Rate), dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 720(E), dated the 28th June, 2017, namely :-
In the said notification, in the SCHEDULE, —
i. against S. No. 1, for the entry in column (4), the entry “Nil” shall be substituted;
ii. against S. No. 1A, for the entry in column (4), the entry “Nil” shall be substituted;
iii. against S. No. 5, for the entry in column (4), the entry “Nil” shall be substituted;
iv. against S. No. 5A, for the entry in column (4), the entry “Nil” shall be substituted;
v. against S. No. 6, for the entry in column (4), the entry “Nil” shall be substituted;
vi. vagainst S. No. 6A, for the entry in column (4), the entry “Nil” shall be substituted;
vii. against S. No. 7, for the entry in column (4), the entry “Nil” shall be substituted;
viii. against S. No. 7A, for the entry in column (4), the entry “Nil” shall be substituted;
xiv. against S. No.8, for the entry in column (4), the entry “Nil” shall be substituted;
xv. against S. No. 9, for the entries in column (4), the entry “Nil” shall be substituted;
xvi. against S. No. 10, for the entries in column (4), the entry “Nil” shall be substituted;
xvii. against S. No. 11, for the entries in column (4), the entry “Nil” shall be substituted;
xviii. against S. No. 12, for the entries in column (4), the entry “Nil” shall be substituted;
xix. against S. No. 13, for the entries in column (4), the entry “Nil” shall be substituted;
x. against S. No. 14, for the entries in column (4), the entry “Nil” shall be substituted;
xvi. against S. No. 15, for the entries in column (4), the entry “Nil” shall be substituted;
xvii. against S. No. 16, for the entries in column (4), the entry “Nil” shall be substituted;
xviii. against S. No. 17, for the entries in column (4), the entry “Nil” shall be substituted;
xix. against S. No. 18, for the entries in column (4), the entry “Nil” shall be substituted;
xx. against S. No. 19, for the entries in column (4), the entry “Nil” shall be substituted;
xxi. against S. No. 19A, for the entries in column (4), the entry “Nil” shall be substituted;
xxii. against S. No. 20, for the entries in column (4), the entry “Nil” shall be substituted;
xxiii. against S. No. 20A, for the entries in column (4), the entry “Nil” shall be substituted;
xxiv. against S. No. 21, for the entries in column (4), the entry “Nil” shall be substituted;
xxv. against S. No. 21A, for the entries in column (4), the entry “Nil” shall be substituted;
xxvi. against S. No. 22, for the entries in column (4), the entry “Nil” shall be substituted;
xxvii. against S. No. 22A, for the entries in column (4), the entry “Nil” shall be substituted;
xxviii. against S. No. 23, for the entries in column (4), the entry “Nil” shall be substituted;
xxix. against S. No. 23A, for the entries in column (4), the entry “Nil” shall be substituted;
xxx. against S. No. 24, for the entries in column (4), the entry “Nil” shall be substituted;
xxxi. against S. No. 24A, for the entries in column (4), the entry “Nil” shall be substituted;
xxxii. against S. No. 24B, for the entries in column (4), the entry “Nil” shall be substituted;
xxxiii. against S. No. 24C, for the entries in column (4), the entry “Nil” shall be substituted;
xxxiv. against S. No. 25, for the entries in column (4), the entry “Nil” shall be substituted;
xxxv. against S. No. 26, for the entries in column (4), the entry “Nil” shall be substituted;
xxxvi. against S. No. 26A, for the entries in column (4), the entry “Nil” shall be substituted;
xxxvii. against S. No. 27, for the entries in column (4), the entry “Nil” shall be substituted;
xxxviii. against S. No. 27A, for the entries in column (4), the entry “Nil” shall be substituted;
xxxix. against S. No. 28, for the entries in column (4), the entry “Nil” shall be substituted;
xl. against S. No. 28A, for the entries in column (4), the entry “Nil” shall be substituted;
xli. against S. No. 29, for the entries in column (4), the entry “Nil” shall be substituted;
xlii. against S. No. 29A, for the entries in column (4), the entry “Nil” shall be substituted;
xliii. against S. No. 30, for the entries in column (4), the entry “Nil” shall be substituted;
xliv. against S. No. 30A, for the entries in column (4), the entry “Nil” shall be substituted;
xlv. against S. No. 31, for the entries in column (4), the entry “Nil” shall be substituted;
xlvi. against S. No. 31A, for the entries in column (4), the entry “Nil” shall be substituted;
xlvii. against S. No. 32, for the entries in column (4), the entry “Nil” shall be substituted;
xlviii. against S. No. 32A, for the entries in column (4), the entry “Nil” shall be substituted;
xlix. against S. No. 33, for the entries in column (4), the entry “Nil” shall be substituted;
l. against S. No. 33A, for the entries in column (4), the entry “Nil” shall be substituted;
li. against S. No. 34, for the entries in column (4), the entry “Nil” shall be substituted;
lii. against S. No. 34A, for the entries in column (4), the entry “Nil” shall be substituted;
liii. against S. No. 35, for the entries in column (4), the entry “Nil” shall be substituted;
liv. against S. No. 35A, for the entries in column (4), the entry “Nil” shall be substituted;
lv. against S. No. 36, for the entries in column (4), the entry “Nil” shall be substituted;
lvi. against S. No. 36A, for the entries in column (4), the entry “Nil” shall be substituted;
lvii. against S. No. 36B, for the entries in column (4), the entry “Nil” shall be substituted;
lviii. against S. No. 36C, for the entries in column (4), the entry “Nil” shall be substituted;
lix. against S. No. 36D, for the entries in column (4), the entry “Nil” shall be substituted;
lx. against S. No. 36E, for the entries in column (4), the entry “Nil” shall be substituted;
lxi. against S. No. 37, for the entries in column (4), the entry “Nil” shall be substituted;
lxii. against S. No. 38, for the entries in column (4), the entry “Nil” shall be substituted.
2. This notification shall come into force on the 1st day of February, 2026.
[F. No. CBIC-190349/75/2025-TRU ]
DHEERAJ SHARMA, Under Secy.
Note: -The principal notification No.1/2017-Compensation Cess (Rate), dated the 28th day of June, 2017, was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 720(E), dated the 28th day of June, 2017, and was last amended vide notification No. 2/2025-Compensation Cess (Rate), dated the 17th September, 2025, published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (i), vide number G.S.R. 659(E), dated the 17th September, 2025.
