Crediting proceeds of cess to Fund
Cess Act s.10, GST (Compensation to States) Act
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Cess proceeds go to a non-lapsable GST Compensation Fund, from which compensation is released to the States; the unutilised balance is shared as prescribed at the end of the transition period.
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The exact words of the law
2,412 characters, uneditedReproduced from the CBIC text. We explain it above — but you should always be able to read it yourself.
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(1) The proceeds of the cess leviable under section 8 and such other amounts as may be recommended by the Council, shall be credited to a non-lapsable Fund known as the Goods and Services Tax Compensation Fund, which shall form part of the public account of India and shall be utilised for purposes specified in the said section.
(2) All amounts payable to the States under section 7 shall be paid out of the Fund.
(3) Fifty per cent. of the amount remaining unutilised in the Fund at the end of the transition period shall be transferred to the Consolidated Fund of India as the share of Centre, and the balance fifty per cent. shall be distributed amongst the States in the ratio of their total revenues from the State tax or the Union territory goods and services tax, as the case may be, in the last year of the transition period. 1 [(3A) Notwithstanding anything contained in sub-section (3), fifty per cent. of such amount, as may be recommended by the Council, which remains unutilised in the Fund, at any point of time in any financial year during the transition period shall be transferred to the Consolidated Fund of India as the share of Centre, and the balance fifty per cent. shall be distributed amongst the States in the ratio of their base year revenue determined in accordance with the provisions of section 5 : Provided that in case of shortfall in the amount collected in the Fund against the requirement of compensation to be released under section 7 for any two months’ period, fifty per cent. of the same, but not exceeding the total amount transferred to the Centre and the States as recommended by the Council, shall be recovered from the Centre and the balance fifty per cent. from the States in the ratio of their base year revenue determined in accordance with the provisions of section 5 .]
(4) The accounts relating to Fund shall be audited by the Comptroller and Auditor-General of India or any person appointed by him at such intervals as may be specified by him and any expenditure in connection with such audit shall be payable by the Central Government to the Comptroller and Auditor-General of India.
(5) The accounts of the Fund, as certified by the Comptroller and Auditor-General of India or any other person appointed by him in this behalf together with the audit report thereon shall be laid before each House of Parliament.
What changed, and when
The amendment trail, newest first — because the version that applies to your case depends on the period.
2019-02-01 · Inserted
Inserted (w.e.f. 01.02.2019) by s.3 of the Goods and Services Tax (Compensation to States) Amendment Act, 2018 (34 of 2018).
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.
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