What is Compensation Cess in GST Act?
Compensation cess is a type of charge levied on certain goods in addition to the applicable GST and it was introduced as part of the GST Act. Compensation cess is currently applicable to some key goods such as:
- Motor vehicles
- Aerated water
- Various types of solid fuel such as coal, briquettes, ovoids and other coal derivatives
- Tobacco and tobacco products including cigarettes (GST not yet applicable, VAT applicable)
GST Compensation Cess on Cars:-
Below Table summarises GST+Compensation Cess on cars in India.
| Type of Vehicle | GST Rate | Compensation Cess | Total Total Tax Payable |
| Petrol/CNG/LPG car less than 1200cc and length less than 4 meters | 28% | 1% | 29% |
| Petrol/CNG/LPG car less than 1200cc and length more than 4 meters | 28% | 15% | 43% |
| Petrol/CNG/LPG car over 1200cc (irrespective of length) | 28% | 22% | 50% |
| Diesel car less than 1500cc and length less than 4 meters | 28% | 3% | 31% |
| Diesel car less than 1500cc and length more than 4 meters | 28% | 20% | 48% |
| Diesel car over 1500cc engine capacity, greater than 4 meters length and ground clearance of 170mm or more | 28% | 22% | 50% |
| Electric Cars (all sizes including 2 and 3 wheelers) | 12% | Nil | 12% |
| Vehicles fitted for use as an ambulance | 28% | Nil | 28% |
| Three wheeler motorized vehicles | 28% | Nil | 28% |
| Fuel Cell Vehicles including hydrogen fuel cell vehicles | 12% | Nil | 12% |
| Motorcycles/mopeds with engine capacity of up to 350cc | 28% | Nil | 28% |
| Motorcycles with engine capacity greater than 350cc | 28% | 3% | 31% |
The vehicle specifications are as per the Motor Vehicle Act, 1988. The rates are liable to periodic change and list is not exhaustive.
Note that diesel vehicles with large engine capacities have the highest compensation cess and by extension the highest tax rates applicable to them. Simultaneously, cars with smaller engines and those driven by cleaner technologies such as electric/fuel cell feature a lower rate of compensation cess.
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