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Notification No. 2/2023 – Compensation Cess (Rate) RSP-based

by Shakshi Bharti | Jan 28, 2024 | GST, 2023 Notifications, Compensation Cess (Rate) 2023 Notifications, Notifications | 0 comments

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Important Keyword: Notification No. 2/2023 - Compensation Cess (Rate), RSP based cess, Pan Masala GST Cess, Tobacco Cess GST, Compensation Cess April 2023, GST Council changes,

Words: 1629; Read time: 9 minutes.

[F. No. 190354/85/2021-TRU]
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(Department of Revenue)

New Delhi, the 31^st March, 2023

Notification No. 2/ 2023 - Compensation Cess (Rate): Seeks to further amend notification No. 1/2017-Compensation Cess (Rate), dated 28th June, 2017.

[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 GST(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 28^th 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 28^th June, 2017, namely:-

In the said notification,

(1). in the Schedule, -

i. against S. No. 1, for the entry in column (4), the entry “0.32R per unit” shall be substituted;

ii. against S. No. 5, for the entry in column (4), the entry “0.36R per unit” shall be substituted;

iii. against S. No. 6, for the entry in column (4), the entry “0.36R per unit” shall be substituted;

iv. against S. No. 7, for the entry in column (4), the entry “0.32R per unit” shall be substituted;

v. against S. No. 19, for the entry in column (4), the entry “0.36R per unit” shall be substituted;

vi. against S. No. 20, for the entry in column (4), the entry “0.12R per unit” shall be substituted;

vii. against S. No. 21, for the entry in column (4), the entry “0.08R per unit” shall be substituted;

viii. against S. No. 22, for the entry in column (4), the entry “0.69R per unit” shall be substituted;

ix. against S. No. 23, for the entry in column (4), the entry “0.28R per unit” shall be substituted;

x. against S. No. 24, for the entry in column (4), the entry “0.08R per unit” shall be substituted;

xi. after S. No. 24 and the entries relating thereto, the following S. No. and entries shall be inserted, namely: -

(1)	(2)	(3)	(4)
“24A.	2403 91 00	“Homogenised” or “reconstituted” tobacco, bearing a brand name	0.36R per unit”;

xii. against S. No. 25, for the entry in column (2), the entry “2404 11 00” shall be substituted;

xiii. against S. No. 26, for the entry in column (4), the entry “0.56R per unit” shall be substituted;

xiv. against S. No. 27, for the entry in column (4), the entry “0.56R per unit” shall be substituted;

xv. against S. No. 28, for the entry in column (4), the entry “0.56R per unit” shall be substituted;

xvi. against S. No. 29, for the entry in column (4), the entry “0.36R per unit” shall be substituted;

xvii. against S. No. 30, for the entry in column (4), the entry “0.56R per unit” shall be substituted;

xviii. against S. No. 31, for the entry in column (4), the entry “0.36R per unit” shall be substituted;

xix. against S. No. 32, for the entry in column (4), the entry “0.36R per unit” shall be substituted;

xx. against S. No. 33, for the entry in column (4), the entry “0.36R per unit” shall be substituted;

xxi. against S. No. 34, for the entry in column (4), the entry “0.36R per unit” shall be substituted;

xxii. against S. No. 35, for the entry in column (4), the entry “0.14R per unit” shall be substituted;

xxiii. against S. No. 36, for the entry in column (4), the entry “0.61R per unit” shall be substituted;

xxiv. after S. No. 36 and the entries relating thereto, the following S. Nos. and entries shall be inserted, namely:

(1)	(2)	(3)	(4)
“36A.	2403 99 90	All goods, other than pan masala containing tobacco 'gutkha', bearing a brand name	0.43R per unit
36B.	2403 99 90	All goods, other than pan masala containing tobacco 'gutkha', not bearing a brand name	0.43R per unit”;

xxv. against S. No. 37, for the entry in column (2), the entry “2404 11 00, 2404 19 00” shall be substituted;

xxvi. against S. No. 38, for the entry in column (2), the entry “2404 11 00, 2404 19 00” shall be substituted;

(2). In the Explanation, after clause (3), following clause shall be inserted, namely: -

“(4) For the purposes of this notification, “R” appearing in column (4) means "retail sale price" as provided in the Schedule to the Goods and Services Tax (Compensation to States) Act, 2017 (15 of 2017)”;

(3). After the Explanation, and before the Paragraph 2, the following shall be inserted, namely: -

“Illustration: Calculation of goods and services tax compensation cess on Pan Masala (S. No. 1 in the Schedule above):

Rate of goods and services tax compensation cess = 0.32R per unit; If retail sale price of unit (pouch) of Pan Masala = Rs. 10;

goods and services tax compensation cess leviable = 0.32R = 0.32*10 = Rs. 3.2 per unit (pouch)”.

2. This notification shall come into force on the 1^st day of April, 2023.

(Vikram Vijay Wanere)
Under Secretary, Government of India

Note: - The principal notification No.1/2017-Compensation Cess (Rate), dated the 28^th day of June, 2017, was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 720(E), dated the 28^th day of June, 2017, and was last amended vide notification No. 1/2023-Compensation Cess (Rate), dated the 28^th February, 2023, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 153(E), dated the 28^th February, 2023.

📚 Frequently Asked Questions (FAQs): Notification No. 2/2023 - Compensation Cess (Rate)

Q1: What is Notification No. 2/2023 - Compensation Cess (Rate)?

Answer:
This notification, issued on 31st March 2023, further amends Notification No. 1/2017 - Compensation Cess (Rate) to introduce RSP (Retail Sale Price)-based cess calculation for pan masala, tobacco, gutkha, and similar products. It defines per unit cess rates as a percentage of RSP and also adds new classification codes for branded/unbranded items.

Q2: What is meant by “0.32R per unit” in the notification?

Answer:
"0.32R per unit" means 32% of the retail sale price (RSP) per unit. For example, if a pouch of pan masala is priced at ₹10:
👉 Cess = 0.32 × ₹10 = ₹3.20 per pouch
This RSP-based calculation method ensures transparency and minimizes tax evasion. 💼 Need GST help? Click here

Q3: Which products are newly added or modified under this notification?

Answer:
🆕 The following have been introduced or amended:
S. No. 24A: Homogenised/reconstituted tobacco (branded) → 0.36R per unit
S. Nos. 36A & 36B: Pan masala (with or without tobacco, branded & unbranded) → 0.43R per unit
Revised cess on hookah tobacco, gutkha, chewing tobacco, and pan masala across multiple serial numbers.
This update mandates both branded and unbranded products to declare RSP for cess assessment.

Q4: Is there an illustration provided for better understanding?

Answer:
✅ Yes. The government has provided an example for Pan Masala (S. No. 1):
🧾 If RSP per pouch = ₹10
💰 Cess = 0.32 × ₹10 = ₹3.20 per pouch
This ensures clear understanding of cess implications for manufacturers and traders.

Q5: How does this affect tobacco manufacturers and distributors?

Answer:
Major implications include:
Mandatory printing of Retail Sale Price (RSP)
RSP-based cess liability, not weight-based
Classification clarity for branded vs. unbranded goods
Increased tax visibility and traceability
👉 Set up your GST-compliant business today

Q6: What is the effective date for Notification No. 2/2023 - Compensation Cess (Rate)?

Answer:
📅 This notification comes into force from 1st April 2023.
It is important for businesses to adapt their billing and pricing software to reflect these new RSP-based cess rates. 📥 File your GST Returns easily here

Q7: How is “R” defined in the cess calculation?

Answer:
🅾️ “R” in this context is defined as the Retail Sale Price (RSP), as per the Schedule of the Goods and Services Tax (Compensation to States) Act, 2017. It is the printed price on the product pack meant for retail sale.

Q8: How can Finodha.in help you with these compliance updates?

Answer:
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Summary 📌

Notification No. 2/2023 - Compensation Cess (Rate) brings a significant shift to RSP-based cess rates for pan masala, gutkha, and tobacco products, replacing weight/unit-based cess. Businesses must update their packaging, declare RSP, and calculate cess per unit accordingly. Effective from April 1, 2023, this move boosts compliance and transparency in the sector.

Need help understanding which GST rate applies to your goods?
👉 Talk to a GST Expert Now