Notification No. 07/2017 – Compensation Case (Rate) Updated

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Notification No. 07/2017 - Compensation Cess (Rate): Seeks to prescribe compensation cess rate on the leasing of motor vehicles

GST: [TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY PART II, SECTION 3, SUB-SECTION (i)]

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 notifies the rate of cess as specified in column 4 of the Table below, falling under the tariff item, sub-heading, heading or Chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975),

as the case may be, as specified in the corresponding entry in column (2), of the Table below, at the rate specified in corresponding entry in column (4) and subject to relevant conditions annexed to this notification, if any, specified in the corresponding entry in column (5) of the Table below:

TABLE

Sl. No.	Tariff item, sub- heading, heading or Chapter	Description of Goods	Rate	Condition No.
(1)	(2)	(3)	(4)	(5)
1.	8702, 8703	Motor Vehicles	65% of cess applicable otherwise on such goods under Notification No. 1/2017- Compensation Cess (Rate) dated, 28^th June, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub Section (i), vide G.S.R. 720 (E) dated the 28^th June, 2017.	1
2.	8702, 8703	Motor Vehicles	65% of cess applicable otherwise on such goods under Notification No. 1/2017- Compensation Cess (Rate) dated, 28^th June, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub Section (i), vide G.S.R. 720 (E) dated the 28^th June, 2017.	2

2. Provided that nothing contained in this notification shall apply on or after1^st July, 2020.

Explanation –For the purposes of this notification, -

“Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, heading, sub-heading and Chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).

The rules for the interpretation of the First Schedule to the said Customs Tariff Act, 1975, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification.

ANNEXURE

Condition No.	Condition
1	i. The Motor Vehicles was purchased by the lesser prior to 1^st July, 2017 and supplied on lease before 1^st July, 2017
2	The supplier of Motor Vehicle is a registered person.Such supplier had purchased the Motor Vehicle prior to 1^st July, 2017 and has not availed input tax credit of central excise duty, Value Added Tax or any other taxes paid on such vehicles.

(Ruchi Bisht)
Under Secretary to
Government of India

📚 Frequently Asked Questions (FAQs): Notification No. 07/2017 - Compensation Cess (Rate)

Q1. What is Notification No. 07/2017 - Compensation Cess (Rate)?

Answer: It prescribed a reduced Compensation Cess rate for eligible motor vehicle leasing transactions.
The notification reduced the cess burden to 65% of the otherwise applicable Compensation Cess, subject to specific conditions.

Q2. When was the notification issued?

Answer: The notification was issued on 13 October 2017.
It was introduced to address transitional GST issues relating to leased motor vehicles.

Q3. Which vehicles were covered?

Answer: Motor vehicles classified under tariff headings 8702 and 8703.
Eligibility also depended on fulfillment of the conditions specified in the notification.

Q4. Was the cess completely exempted?

Answer: No.
The notification reduced the cess burden but did not eliminate Compensation Cess altogether.

Q5. What does 65% of applicable cess mean?

Answer: It means the taxpayer paid Compensation Cess at a concessional level equal to 65% of the normal cess amount.
The exact benefit varied depending on the vehicle category and applicable cess rate.

Q6. Who could claim the benefit?

Answer: Eligible lessors and registered suppliers meeting the prescribed conditions.
Purchase dates, lease dates, and ITC status were important factors.

Q7. Was GST itself reduced?

Answer: No.
The notification affected only Compensation Cess and not the GST rate.

Q8. Did the notification apply to all leased vehicles?

Answer: No.
Only qualifying vehicles satisfying the notification's conditions were eligible.

Q9. What happened after 1 July 2020?

Answer: The notification ceased to apply.
The concessional benefit was no longer available after that date.

Q10. Why was the notification considered a transition measure?

Answer: Because it addressed vehicles purchased under the pre-GST regime.
It helped avoid excessive tax impact when those vehicles continued to be leased after GST implementation.

Q11. Was input tax credit relevant?

Answer: Yes.
One condition required that specified pre-GST tax credits should not have been availed.

Q12. Which law empowered this notification?

Answer: Section 8(2) of the GST Compensation to States Act, 2017.
This provision allows the Government to prescribe Compensation Cess rates.

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