IGST and Compensation Cess

Additional duties of customs, commonly referred to as the Countervailing Duty (CVD) and Special Additional Duty of Customs (SAD), has been be replaced by the levy of the Integrated Goods and Services Tax (IGST), barring a few exceptions, such as pan masala and certain petroleum products. The IGST replaces the previous system of federal and state categories of indirect taxation.

A Customs Duty calculator is made available on the online portal of excise and customs, the ICEGATE website. There are seven rates prescribed for IGST– Nil, 0.25 percent, 3 percent 5 percent, 12 percent, 18 percent, and 28 percent. The actual rate applicable to an item will depend on its classification and will be specified in Schedules notified under Section 5 of the IGST Act, 2017.

Further, a few items such as aerated water products, tobacco products, and motor vehicles, among others, will attract an additional levy of the GST Compensation Cess, over and above IGST. The Cess is calculated on the transaction value or the price at which the goods are sold.

The Goods and Services Tax (Compensation to States) Act, 2017 was enacted to levy Compensation Cess for providing compensation to Indian states for the loss of revenue arising on account of implementation of the Goods and Services Tax from July 1, 2017.

The Compensation 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.