Levy and collection of cess
Cess Act s.8, GST (Compensation to States) Act
Straight from CBIC
Official source, not a summary of a summary
Full text included
Read the exact words of the law yourself
Amendment history
See what changed, and when
Free, always
No login, no paywall, no book to buy
In one line
The charging section for compensation cess: cess is levied on notified supplies – today essentially pan masala, tobacco products and specified goods – on the same value as GST, over and above CGST plus SGST or IGST. Composition taxpayers do not collect it.
What this means in practice
The parts that actually decide cases — the things a practitioner checks first.
Compensation cess is charged over and above GST on the notified goods – today essentially pan masala, tobacco and tobacco products, aerated waters and specified motor vehicles – under Notification 01/2017-Compensation Cess (Rate) as amended.
A composition taxpayer neither collects nor pays the cess on his outward supplies.
Cess is also payable on imports, collected with customs duty, and on reverse-charge supplies of the notified goods.
The rate structure for tobacco was revised alongside the 22-09-2025 GST reset – Notification 03/2025-Compensation Cess (Rate) dated 31-12-2025 amends 01/2025; check the current entry before quoting a figure.
Questions people actually ask
Real questions we get on this provision, answered straight.
Do we pay compensation cess on a car we bought for the business?+
The seller charges it on the notified motor-vehicle entries. Credit of the cess can be used only against cess liability – and since a business that does not supply cess goods has no cess output, the cess is a cost, on top of the section 17(5) block on the vehicle credit itself.
How this provision is built
The skeleton, clause by clause — useful when a notice cites a specific sub-clause.
The exact words of the law
2,005 characters, uneditedReproduced from the CBIC text. We explain it above — but you should always be able to read it yourself.
Read the full provision+
(1) There shall be levied a cess on such intra-State supplies of goods or services or both, as provided for in section 9 of the Central Goods and Services Tax Act, and such inter-State supplies of goods or services or both as provided for in section 5 of the Integrated Goods and Services Tax Act, and collected in such manner as may be prescribed, on there commendations of the Council, for the purposes of providing compensation to the States for loss of revenuearising on account of implementation of the goods and services tax with effect from the date from which the provisions of the Central Goods and Services Tax Act is brought into force, for a period of five years or for such period as may be prescribed on there commendations 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 under section 10 of the Central Goods and Services Tax Act. (2)The cess shall be levied on such supplies of goods and services as are specified in column
(2) of the Schedule, on the basis of value, quantity or on such basis at such rate not exceeding the rate set for thin the corresponding entry in column
(4) of the Schedule, as the Central Government 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 under section 15 of the Central Goods and Services Tax 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 section 3 of the Customs Tariff Act, 1975, at the point when duties of customs are levied on the said goods under section 12 of the Customs Act,1962, on a value determined under the Customs Tariff Act, 1975.
Read this with
A provision rarely works alone. These are the ones it points to.
Where this comes from
Text reproduced from the Central Board of Indirect Taxes and Customs, as available on 2026-09-05. The explanation and practice notes above are GSTZone’s own, written for this hub. If you spot anything out of date, tell us and we’ll fix it — this hub is checked daily against CBIC.
Reading is free. Getting it wrong isn’t.
Does this apply to your case, or not?
Reading the section is one thing. Knowing whether it bites on your facts, and what it costs if it does, is another. Send us the situation – we will tell you straight, and only take it on if we can genuinely help.
6+ years · 2,500+ GST registrations filed · Bhopal, serving all of India