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[F. No. 334/1/2017-TRU]
Government of India
Ministry of Finance
(Department of Revenue)
New Delhi, the 28th June, 2017
Notification No. 02/2017 - Compensation Cess (Rate): To notify the rates of compensation cess on supply of specified services
GST: [TO BE PUBLISHED IN THE GAZZETE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]
G.S.R......(E).- In exercise of the powers conferred by sub-section (1) and 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, that the cess, on the supply of services of description specified in column (2) of the Table below and falling in Chapter, Section, Heading or Group specified in column (3) of the said Table, shall be levied at the rate specified in the corresponding entry in column (4) of the said Table.
Table
| Sl. No. | Description of Services | Chapter, Section, Heading or Group | Rate (in per-cent.) |
| (1) | (2) | (3) | (4) |
| 1 | Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration | Chapter 99 | Same rate of cess as applicable on supply of similar goods involving transfer of title in goods |
| 2 | Transfer of right in goods or of undivided share in goods without the transfer of title thereof | Chapter 99 | Same rate of cess as applicable on supply of similar goods involving transfer of title in goods |
| 3 | Any other supply of services | Chapter 99 | Nil |
- Explanation.- Reference to “Chapter”, “Section”, “Heading” or “Group”, wherever they occur, unless the context otherwise requires, shall mean respectively as “Chapter, “Section” and “Heading” in the scheme of classification of services.
- This notification shall come into force with effect from 1st day of July, 2017.
(Ruchi Bisht)
Under Secretary to the
Government of India
📚 Frequently Asked Questions (FAQs): Notification No. 02/2017 - Compensation Cess (Rate)
Q1. What is Notification No. 02/2017 - Compensation Cess (Rate)?
Answer: It is a notification that prescribed Compensation Cess rates on specified services under the GST regime.
The notification became effective from 1 July 2017 and mainly covers services involving transfer of rights in goods.
Q2. When did the notification come into force?
Answer: The notification came into force on 1 July 2017.
This date coincides with the commencement of the GST regime.
Q3. Which services attract Compensation Cess under this notification?
Answer: Primarily services involving transfer of right to use goods or transfer of rights in goods without transfer of title.
The cess rate mirrors the rate applicable to similar goods involving transfer of ownership.
Q4. Do all services attract Compensation Cess?
Answer: No.
The notification specifically provides that "Any other supply of services" attracts nil Compensation Cess.
Q5. What is meant by transfer of right to use goods?
Answer: It generally refers to arrangements where a person is allowed to use goods for consideration without becoming the owner.
Examples include leasing of vehicles, machinery, or equipment.
Q6. How is the cess rate determined?
Answer: The rate is the same as the Compensation Cess rate applicable to the similar goods if they were supplied with transfer of title.
Therefore, the underlying goods classification becomes important.
Q7. What is Chapter 99?
Answer: Chapter 99 is part of the GST service classification scheme.
The notification places the specified services under this chapter.
Q8. Does leasing of a luxury vehicle attract Compensation Cess?
Answer: Potentially yes.
Since it is a transfer of the right to use goods, the cess rate generally follows the cess applicable to the underlying vehicle.
Q9. Are consulting services covered by this notification?
Answer: Consulting services generally fall under the category of "Any other supply of services" and therefore attract nil Compensation Cess under this notification.
Q10. Which law empowers this notification?
Answer: Sections 8(1) and 8(2) of the GST (Compensation to States) Act, 2017.
These provisions authorize the Government to notify Compensation Cess rates.
Q11. Is Compensation Cess separate from GST?
Answer: Yes.
Compensation Cess is an additional levy imposed on specified goods and certain service transactions in addition to GST.
Q12. Why was this notification necessary?
Answer: To ensure that leasing and similar right-to-use transactions did not escape the cess burden applicable to the underlying goods.
It created parity between sale and leasing arrangements.
Download PDF: Notification No. 02/2017 - Compensation Cess (Rate)
More Information: https://taxinformation.cbic.gov.in/
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