CESS-BEARING SUPPLIES (Compensation Cess)

G.1 — Aerated water inter-State supply

Facts: Mumbai manufacturer supplies aerated waters Rs. 50,000 to Delhi distributor.

Computation / Steps:

Step 1. Inter-State per s. 7(1) IGST.

Step 2. IGST 28% on Rs. 50,000 = Rs. 14,000.

Step 3. Compensation Cess 12% on Rs. 50,000 = Rs. 6,000.

Step 4. Total tax = Rs. 20,000 (40% effective on Rs. 50,000).

Step 5. Mumbai manufacturer collects + remits.

Step 6. Delhi distributor takes IGST + Cess credit (cess credit siloed).

Result: Aerated waters IGST + Cess combined 40%. Major component of pricing.

G.2 — Cigarettes intra-Delhi supply

Facts: Delhi retailer sells cigarettes (length > 75mm) 1,000 sticks at Rs. 500/stick to walk-in customer.

Computation / Steps:

Step 1. Total value = Rs. 5,00,000.

Step 2. Intra-Delhi — CGST 14% + DGST 14% = Rs. 1,40,000.

Step 3. Compensation Cess: Rs. 4170 per 1000 sticks specific + 290% ad valorem on retail sale price (subject to cap).

Step 4. Per current notification — specific Rs. 4,170 + ad valorem capped (calculation depends on specific cigarette length / type per Schedule).

Step 5. Total tax burden very high — typically 60-70% effective on cigarette value.

Step 6. No ITC at customer (B2C).

Result: Cigarettes — very high tax burden including specific + ad valorem cess. Sin tax design.

G.3 — Coal supply from mine to manufacturer

Facts: Coal India supplies 1,000 tonnes coal Rs. 50 lakh to power plant.

Computation / Steps:

Step 1. Inter-State (if cross-State) or intra-State per supply.

Step 2. CGST + State component or IGST at coal rate 5%.

Step 3. Compensation Cess on coal: Rs. 400 per tonne specific = 1,000 × Rs. 400 = Rs. 4,00,000.

Step 4. Power plant takes IGST/CGST credit + Cess credit (siloed for cess payment).

Step 5. If power plant's downstream supplies (electricity) are exempt, ITC reversal under Rule 42/43.

Step 6. Coal cess significant input cost.

Result: Coal supply — Rs. 400/tonne specific Compensation Cess. Significant cost in coal-intensive industries.

G.4 — Online gaming (post 01.10.2023) 28% Cess

Facts: Delhi-based fantasy sports platform accepts bet Rs. 1,000 from customer post 01.10.2023.

Computation / Steps:

Step 1. Post 01.10.2023 — online gaming notified under GST + Compensation Cess framework.

Step 2. GST 28% on full face value of bet = Rs. 280.

Step 3. Additional Compensation Cess 28% on full face value = Rs. 280.

Step 4. Combined tax = Rs. 560 (56% effective) on bet value.

Step 5. Critical: tax on full face value (not on margin) — substantial sector reset.

Step 6. Foreign gaming platforms register under s. 14 IGST simplified scheme.

Result: Online gaming 28% GST + 28% Cess on full face value post-01.10.2023. Major industry reset.