Notification No. 02/2018 - Compensation Cess(Rate) Explained

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Notification No. 02/2018 - Compensation Cess (Rate): Seeks to amend Notification No. 1/2017 -Compensation Cess (Rate) dated 28.06.2017 togive effect to the recommendations of the GST Council in it's 28th meeting held on 21.07.2018

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

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 further 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, -

after S. No. 41 and the entries relating thereto, the following serial numbers and the entries shall be inserted, namely:-

“41A

Coal rejects supplied by a coal washery, arising out of coal on which compensation cess has been paid and no input tax credit thereof has not been availed by any person.

NIL”;

after S. No. 42 A and the entries relating thereto, the following serial numbers and the entries shall be inserted, namely:-

“42B

Fuel Cell Motor Vehicles

NIL”.

2. This notification shall come into force on the 27^th July, 2018.

(Gunjan Kumar Verma)
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. 1/2018-Compensation Cess (Rate) dated the 25^th January, 2018, published vide number G.S.R.93(E), dated the 25^th January, 2018.

📚 Frequently Asked Questions (FAQs): Notification No. 02/2018 Compensation Cess (Rate)

Q1: What is Notification No. 02/2018 - Compensation Cess (Rate)?

Answer:
It is a GST notification dated 26 July 2018 that amended Notification 1/2017 to grant NIL Compensation Cess on coal rejects and fuel cell motor vehicles.

Q2: From when is this notification applicable?

Answer:
It is effective from 27 July 2018.

Q3: Under which law was this issued?

Answer:
Under Section 8(2) of the GST (Compensation to States) Act, 2017.

Q4: What is Serial No. 41A in this notification?

Answer:
It covers coal rejects supplied by coal washeries where cess has already been paid on coal and ITC not availed. Rate: NIL.

Q5: What is Serial No. 42B?

Answer:
It provides NIL Compensation Cess on Fuel Cell Motor Vehicles.

Q6: Does this apply to electric vehicles (EVs)?

Answer:
No. It specifically mentions Fuel Cell Motor Vehicles. However, EVs already enjoy lower GST rates under separate notifications.

Q7: Is input tax credit allowed on coal rejects under this entry?

Answer:
Condition: ITC on original coal should NOT have been availed.

Q8: Why is NIL cess given on fuel cell vehicles?

Answer:
To promote clean energy and green mobility initiatives.

Q9: Does this amendment change GST rate also?

Answer:
No. It only impacts Compensation Cess, not base GST rate.

Q10: Is this notification still valid in 2025?

Answer:
Yes. It remains valid unless amended or superseded.

Q11: How to report NIL cess supplies in GSTR-1?

Answer:
You must correctly classify HSN and mention Compensation Cess as NIL.
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Q12: What happens if cess was wrongly charged after 27 July 2018?

Answer:
You may need to issue credit notes under Section 34 of CGST Act and adjust returns.

Q13: Can manufacturers of fuel cell vehicles claim ITC?

Answer:
Yes, subject to normal ITC provisions under Section 16 of CGST Act.

Q14: Is Compensation Cess still applicable on coal generally?

Answer:
Yes. Only coal rejects meeting conditions get NIL cess.

Q15: How can businesses ensure compliance with Compensation Cess rules?

Answer:
Maintain proper HSN classification, ITC records, and file accurate returns.
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