Role of Cess in GST

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Cess on GST
Compensation Cess on GST

When to levy of cess on GST and when not to apply the same is a very common question of entrepreneurs as well as practitioners. While filing form GSTR-1, there is an additional column of “Cess” after the columns of CGST and SGST. So, let us discuss about this matter in detail.

Applicability:

As GST is a consumption based tax so various manufacturing driven States like Maharashtra, Gujarat feared revenue losses. In order to compensate them for the losses, compensation cess was introduced on few demerit and luxury products. However, it was to be levied only for a period of five years i.e. from 2017 up to 2022.

  • Taxpayers under Composition Scheme and those exporting notified goods were not required to levy it.
  • The Input Tax Credit of Cess could only be adjusted against ITC of Cess and not against Tax amount.
  • The Cess amount went to Central Government which then allocated the same to various State Governments.
  • Different rates were notified for different products.
  • The goods on which it was levied are: Pan Masala; Unmanufactured Tobacco; Branded Tobacco refuse; Cheroots and Cigar; Cigarillos; Cigarettes containing tobacco; Branded Hookah or Gudaku tobacco; Chewing tobacco; Coal, avoids and similar solid fuels manufactured from lignite, coal; Aerated waters; Motor cars or other motor vehicles principally designed for the transport of persons; Petrol, liquefied petroleum gas (LPG) or compressed natural gas (CNG) driven motor vehicles of engine capacity not exceeding 1200cc and of length not exceeding 4000 mm; Diesel driven motor vehicles of engine capacity not exceeding 1500cc and of length not exceeding 4000  mm; Motor vehicles of engine capacity not exceeding 1500 cc; Motor vehicles of engine capacity over 1500 cc, popularly known as Sports Utility Vehicles (SUVs) including utility vehicles.

So, to conclude it can be said that mostly those items were included in the list which are unhealthy. A country’s tax system should be such only which demotivates consumers to consume unhealthy products.

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