Notified levy of Compensation cess based on Retail Sale Price
The CBIC vide Notification No. 01/2023-Compensation Cess and Notification No. 02/2023-Compensation Cess (Rate) both dated March 31, 2023 has notified provisions of Section 163 of the Finance Act, 2023 relating to the levy of compensation cess based on Retail Sale Price (“RSP”).
Section 163 has amended the Schedule of the Goods and Services Tax (Compensation to States) Act, 2017 (15 of 2017) (“the Compensation Cess Act”) pertaining to the maximum rate at which GST Compensation Cess may be levied/ collected for items such as Pan Masala (from 135% ad valorem to 51% of the retail sale price/ unit), Tobacco and manufactured tobacco substitutes, including tobacco products (INR 4170/ 1000 sticks or 290% ad valorem or a combination thereof but not exceeding INR 4170/ 1000 sticks + 290% ad valorem or 100% of retail sale price/ unit). Further, the meaning of RSP in various scenarios has been explained through an Explanation to the said Schedule.
In continuity with the above, Notification No. 02/2023- Compensation Cess (Rate) dated March 31, 2023 has been issued to change the compensation cess on tobacco and pan masala from ad valorem to RSP based.
The compensation cess rate for pan masala and all unbranded/branded goods other than pan masala containing tobacco ‘gutkha’ and “Homogenised” or “reconstituted” tobacco, bearing a brand name, has been changed.
The amendment vide the Finance Act, 2023 relating to changes in the GST compensation cess w.e.f. April 01, 2023 has been summarized in the below table:
| Sl. No. | Chapter/Heading/Sub-Heading/Tariff Item | Description of Goods | Rate of Goods and Services tax compensation cess (Prior to 1st April 2023) |
Rate of Goods and Services tax compensation cess (From 1st April 2023) |
|
1. |
2106 9020 |
Pan- Masala |
60% |
0.32R per unit
“R” means “retail sale price” as provided in the Schedule to the Compensation Cess Act. |
| 5. | 2401 | Unmanufactured tobacco (without lime tube)- bearing a brand name | 71% |
0.36R per unit |
|
6. |
2401 | Unmanufactured tobacco (with Lime tube) bearing a brand name | 65% |
0.36R per unit |
|
7. |
2401 30 00 | Tobacco refuse, bearing a brand name | 61% | 0.32R per unit |
| 19. | 2403 11 10 | ‘Hookah’ or ‘Gudaku’ tobacco bearing a brand name | 72% |
0.36R per unit |
|
20. |
2403 11 10 | Tobacco used for smoking ‘hookah’ or ‘chilam’ commonly known as ‘hookah’ tobacco or ‘gudaku’ not bearing a brand name | 17% | 0.12R per unit |
| 21. | 2403 11 90 | Other water pipe smoking tobacco not bearing a brand name | 11% |
0.08R per unit |
|
22. |
2403 11 90 | Smoking mixtures for pipes and cigarettes | 290% | 0.69R per unit |
| 23. | 2403 19 90 | Other smoking tobacco bearing brand name | 49% |
0.28R per unit |
|
24. |
2403 19 90 | Other smoking tobacco not bearing a brand name | 0.08R per unit | 0.08R per unit |
| 24A. | 2403 91 00 | Homogenised” or “reconstituted” tobacco, bearing a brand name |
0.36R per unit |
|
|
25. |
2403 91 00 or 2404 11 00
2404 11 00 |
“Homogenised” or “reconstituted” tobacco, bearing a brand name | 72% | |
| 26. | 2403 99 10 | Chewing tobacco (without lime tube) | 160% |
0.56R per unit |
|
27. |
2403 99 10 | Chewing tobacco (with lime tube) | 142% | 0.56R per unit |
| 28. | 2403 99 10 | Filter khaini | 160% |
0.56R per unit |
|
29. |
2403 99 20 | Preparations containing chewing tobacco | 72% | 0.36R per unit |
| 30. | 2403 99 30 | Jarda scented tobacco | 160% |
0.56R per unit |
|
31. |
2403 99 40 | Snuff | 72% | 0.36R per unit |
| 32. | 2403 99 50 | Preparations containing snuff | 72% |
0.36R per unit |
|
33. |
2403 99 60 | Tobacco extracts and essence bearing a brand name | 72% | 0.36R per unit |
| 34. | 2403 99 60 | Tobacco extracts and essence not bearing a brand name | 65% |
0.36R per unit |
|
35. |
2403 99 70 | Cut tobacco | 20% | 0.14R per unit |
| 36. | 2403 99 90 | Pan masala containing tobacco ‘Gutkha’ | 204% |
0.61R per unit |
|
36A. |
2403 99 90 | All goods, other than pan masala containing tobacco ‘gutkha’, bearing a brand name | 0.43R per unit | |
| 36B. | 2403 99 90 | All goods, other than pan masala containing tobacco ‘gutkha’, not bearing a brand name |
0.43R per unit |
|
|
37. |
2403 99 90
2404 11 00, 2404 19 00 |
All goods, other than pan masala containing tobacco ‘gutkha’, bearing a brand name | 96% | |
| 38. |
2403 99 90
2404 11 00, 2404 19 00 |
All goods, other than pan masala containing tobacco ‘gutkha’, not bearing a brand name | 89% |
|
|
Illustration: Calculation of GST compensation cess on Pan Masala (S.No. 1 in the Schedule above): Rate of GST compensation cess = 0.32R per unit; If retail sale price of unit (pouch) of Pan Masala = Rs. 10; GST compensation cess leviable = 0.32R = 0.32*10 = Rs. 3.2 per unit (pouch) |
The Notification No. 01/2023-Compensation Cess can be accessed at - https://taxinformation.cbic.gov.in/view-pdf/1009681/ENG/Notifications
The Notification No. 2/2023-Compensation Cess (Rate) can be accessed at - https://taxinformation.cbic.gov.in/view-pdf/1009682/ENG/Notifications
