Notification No. 01/2018 Compensation Cess Explained

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Notification No. 01/2018 dated 14.11.2018 which notifies the list of Acts of Central Government and State Governments under which specified taxes are being subsumed into the Goods and Services Tax.

G.S.R. (E).- In exercise of the powers conferred by sub-section (2) of section 8 of the Goods and Services Tax (Compensation to States) Act, 2017 (15 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 1/2017-Compensation Cess (Rate), dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 720 (E), dated the 28th June, 2017, namely,-

In the said notification, in the Schedule, -

(i) after S. No. 42 and the entries relating thereto, the following serial numbers and the entries shall be inserted
(1)
(2)
(3)
42A.
87
All old and used motor vehicles
(4)
NIL

Explanation: Nothing contained in this entry shall apply if the supplier of such goods has availed input tax credit as defined in clause (63) of section 2 of the Central Goods and Services Tax Act, 2017, CENVAT credit as defined in CENVAT Credit Rules, 2004, or the input tax credit of
Value Added Tax or any other taxes paid on such vehicles.

(ii) in S. No. 43, for the entry in column (2), the entry “8702 or 8703”, shall be substituted;

(Ruchi Bisht)
Under Secretary to the Government of India

Note: The principal notification No.1/2017-Compensation Cess (Rate) dated the 28th June, 2017 was published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (i), vide number G.S.R. 720(E), dated the 28th June, 2017 and last amended vide notification No. 6/2017-, Compensation Cess (Rate) dated the 13th October, 2017, published vide number G.S.R.1282(E), dated the 13th October, 2017.

📚 Frequently Asked Questions (FAQs): Notification No. 01/2018 Compensation Cess

Q1: What is Notification No. 01/2018 Compensation Cess?

Answer:
It is a Government notification dated 14.11.2018 listing Central and State Acts whose taxes were merged into GST and Compensation Cess under the GST regime.

Q2: Under which Act was this notification issued?

Answer:
It was issued under the GST (Compensation to States) Act, 2017, particularly linked with Section 8.

Q3: Does this notification impose new tax?

Answer:
No ❌
It only lists old taxes that were subsumed into GST.

Q4: Is Entertainment Tax completely abolished?

Answer:
Yes (except for local body levy in limited cases). Most state entertainment taxes are replaced by GST.

Q5: Is Luxury Tax removed after GST?

Answer:
Yes. Luxury tax on hotels is replaced by GST slab rates.

Q6: What is Compensation Cess?

Answer:
It is an additional cess charged on specific goods like:
Tobacco
Coal
Aerated drinks
Motor vehicles
It helps compensate states for GST revenue loss.
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https://finodha.in/gst-return-filing/

Q7: Is Entry Tax applicable now?

Answer:
No. Entry Tax and Octroi are abolished and replaced by GST.

Q8: How does this affect old pending tax disputes?

Answer:
Section 174 of CGST Act protects pending cases under old laws. Old disputes can continue under repealed Acts.

Q9: Do businesses need to amend registration due to this notification?

Answer:
No direct amendment required. But businesses must be registered under GST.
Need GST registration?
👉 Apply now: https://finodha.in/online-gst-registration/

Q10: Does Compensation Cess apply to all goods?

Answer:
No. Only notified goods under Compensation Cess Schedule are covered.

Q11: Is this notification still relevant in 2024–2025?

Answer:
Yes ✅
Even though issued in 2018, it defines the legal foundation of GST transition and remains valid.

Q12: Can a taxpayer claim refund of old taxes after GST?

Answer:
Refunds are governed by transitional provisions under Section 140 (Transitional Credit) of CGST Act.

Q13: Does this notification apply to all states?

Answer:
Yes. It includes multiple states like Bihar, Gujarat, Kerala, Goa, Jharkhand, etc., as per Gazette list 01 compen.

Q14: How is this connected to GST Compensation to States?

Answer:
When states lost revenue due to removal of these taxes, Compensation Cess was introduced to compensate them.

Q15: Where can I get expert help on GST compliance?

Answer:
You can consult GST experts at Finodha:
GST Compliance: https://finodha.in/gst-compliance/
GST Return Filing: https://finodha.in/gst-return-filing/
Business Setup: https://finodha.in/setup-business/

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