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Tag: GST Council Updates

  • WHAT IS CESS IN GST INDIA? MEANING, RATES, AND APPLICABILITY

    The GST framework in India has undergone a significant transformation, effective from 22 September 2025. One of the most notable changes concerns the GST Compensation Cess, a levy originally introduced to protect state revenues during the transition to the Goods and Services Tax regime. With the latest policy updates, the cess has been removed for nearly all goods, except for tobacco and related products, which continue to attract the levy until outstanding state compensation loans are repaid.

    This article provides a clear understanding of the current provisions, including what is cess in GST, how it operates today, and what taxpayers must know to remain compliant.

    Platforms like TMWala help businesses track GST rate changes, cess applicability, and automatically update their invoicing and tax calculations.

    MEANING AND RELEVANCE TODAY: CESS ON GST

    While the cess has largely served its original function, its continued limited application ensures that previously borrowed funds are repaid without burdening general government revenues. The transition to a more streamlined GST system in 2025 has reduced taxpayer complexity, with only tobacco products retaining the earlier cess framework.

    UNDERSTANDING THE PURPOSE OF GST COMPENSATION CESS

    The term GST cess refers to a special levy introduced under the GST Compensation Cess Act 2017, designed to ensure compensation to states under GST for revenue losses after the introduction of GST in 2017. Since GST is a destination-based tax, states that produce or export goods are likely to experience revenue shortfalls. The cess was imposed on select goods to bridge this gap.

    Initially intended to last five-year periods, the cess remained in force beyond 2022 due to revenue disruptions caused by the COVID-19 pandemic, during which the central government borrowed funds to maintain state compensation. The current cess collection is used to repay these borrowings.

    SCOPE OF CESS AFTER SEPTEMBER 2025: WHAT REMAINS TAXABLE?

    With the unveiling of the revised rate structure at the 56th GST Council Meeting in September 2025, the tax system was simplified into three broad rate categories:

    • 5 percent (merit goods),
    • 18 percent (standard goods and services), and
    • 40 percent (sin and luxury items).

    Simultaneously, cess on GST was discontinued for almost all commodities.

    However, cess applicable on GST continues for a specific group of products, namely:

    • Cigarettes
    • Pan masala
    • Gutkha
    • Chewing tobacco, including zarda
    • Unmanufactured tobacco
    • Beedis

    These items will remain under the existing cess framework until the central government fully clears the outstanding loans and interest liabilities previously taken to compensate states. Once repaid, these products will be subject only to the standard 40 percent GST rate or any new levy that may be introduced in the future.

    GOODS NO LONGER LIABLE FOR COMPENSATION CESS

    A substantial list of products has now been exempted from the compensation cess owing to the 2025 reforms. Some notable categories include:

    • Aerated waters and carbonated beverages
    • Fruit-based carbonated drinks
    • Coal and similar solid fuels
    • Luxury cars and SUVs
    • High-end motorcycles (over 350cc)
    • Private aircraft and yachts
    • Admission to sports events and entertainment, such as professional leagues
    • Betting, online gaming, and casino activities

    CURRENT GST AND CESS RATES FOR TOBACCO PRODUCTS

    Despite the broader withdrawal of the cess, tobacco-related products continue to be taxed under the earlier rate structure, which features a 28 percent GST rate plus a fixed cess amount based on product type and size. The cess remains a specific rate per thousand units for cigarettes and a fixed monetary amount per kilogram or per thousand pieces for other tobacco items.

    These rates will stay in effect until the compensation loans are fully serviced, after which the government plans a comprehensive restructuring of tobacco taxation.

    INPUT TAX CREDIT ON GST COMPENSATION CESS

    Input Tax Credit (ITC) rules for the compensation cess remain unchanged. Taxpayers may claim ITC on the cess only to offset their own cess liability on outward supplies. It cannot be used to pay CGST, SGST, or IGST. The restriction ensures that the cesspool is exclusively used for its intended purpose, servicing outstanding state compensation liabilities.

    WHEN MUST A TAXPAYER COLLECT COMPENSATION CESS?

    All registered suppliers dealing in goods that still attract the levy must collect and remit the cess, except for exporters and taxpayers registered under the Composition Scheme. Imports of tobacco and related products also attract the compensation cess in addition to customs duties and IGST.

    Exporters, however, may claim refunds of cess paid on exported goods, maintaining the zero-rated nature of export supplies under GST.

    HOW TO CALCULATE CESS ON GST

    As compensation cess now applies only to a narrow range of goods, its calculation remains straightforward.

    1. Identify the applicable GST rate and cess amount for the product.
    2. Determine the taxable value of the supply.
    3. Apply the fixed cess amount (for tobacco products, this is usually a rate per thousand units).

    Even though many goods no longer require a separate cess calculation due to the new consolidated GST rates, tobacco products must still account for the cess independently.

    FINANCIAL MANAGEMENT OF CESS COLLECTIONS

    Although compensation payments to states ended in June 2022, the cess continues to be collected solely to repay loans raised during periods of revenue shortfall. All cess proceeds are credited to the GST Compensation Fund and applied to the repayment of interest and principal. Any surplus remaining after complete repayment will subsequently be distributed to states in accordance with statutory revenue-sharing principles.

    CONCLUSION

    The GST reforms implemented in September 2025 have substantially altered the landscape of special levies under GST. The compensation cess, once widely applied to numerous goods, has now been restricted to tobacco and related items pending full repayment of compensation loans. The updated rate structure simplifies compliance, provides clarity for businesses, and supports the final phase-out of the cess mechanism over the coming years.

    Understanding what cess in GST is, the meaning of GST cess, and the scope of cess applicable to GST remains essential for businesses that continue to deal with tobacco products or require clarity on GST compliance. The policy direction aims to move toward a simplified, stable, and transparent tax framework while ensuring that historic commitments made to the states are fully honoured.

    Tools like TMWala enable businesses to stay compliant effortlessly by automating GST calculations, cess applicability, and invoice updates, supporting a smooth transition into the simplified post-2025 tax regime.

    FAQs

    1. What is cess in GST?
      Cess is a special levy charged on select goods.
    2. Is GST Compensation Cess still applicable in 2025?
      Yes, but only on tobacco and related products.
    3. Which products still attract GST cess after September 2025?
      Cigarettes, beedis, pan masala, gutkha, chewing tobacco, and unmanufactured tobacco.
    4. Why was the cess continued beyond 2022?
      It continues to repay loans taken by the Centre to compensate states during revenue shortfalls.
    5. What goods no longer attract compensation cess?
      Items like luxury vehicles, aerated drinks, high-end motorcycles, coal, and online gaming.
    6. What are the current GST and cess rates for tobacco products?
      They attract a 28% GST plus a fixed cess amount depending on product type and size.
    7. Can ITC be claimed on Compensation Cess?
      Yes, but it can only be used to pay cess liability, not CGST, SGST, or IGST.
    8. Do exporters need to pay cess?
      They may pay cess on inputs but can claim a refund since exports are zero-rated.
    9. How is GST cess calculated?
      Apply the fixed cess rate (often per thousand units) to the taxable value of the product.
    10. How can TMWala help businesses with GST cess compliance?
      TMWala automates GST rate updates, cess calculations, and invoicing to prevent compliance errors.

  • GST ON PENS, PAPERS & STATIONERY ITEMS

    INTRODUCTION

    With the implementation of the Goods and Services Tax (GST) in India, the taxation system has become more streamlined, impacting various sectors, including the stationery industry. GST on stationery items has introduced transparency and uniformity, but frequent rate revisions require businesses and consumers to stay informed. The GST rate for stationery items varies based on the type and materialranging from NIL for items like chalk and slates to 18% for metal-based or processed products. Accurate classification using the HSN code for stationery is essential for proper invoicing, compliance, and claiming input tax credit (ITC).

    Over time, the GST Council has made several rate revisions to resolve issues like inverted duty structures and clarify product categorization. Some items fall under the category of exempt supply under GST, particularly educational materials or goods supplied directly to schools under specific conditions. Shopkeepers and retailers must also be aware of the GST rules for shopkeepers, including mandatory registration (based on turnover), issuing invoices with HSN codes, timely return filing, and displaying their GSTIN at the place of business.

    Services associated with stationery, especially printing, also fall under GST. The GST on printing varies depending on whether the printing involves supply of material or just the service, generally taxed at 12% or 18%. Lastly, notebooks, which are a common educational necessity, are classified under HSN code 4820. The HSN code for notebook covers items like exercise books, diaries, and lab notebooks, typically attracting 12% GST.

    This article explores all these key aspects in detail to help shopkeepers, educational institutions, and everyday consumers navigate GST rules more effectively.

    GST COUNCIL UPDATES ON STATIONERY

    • At the 47th GST Council meeting, several stationery items such as pencil sharpeners, paper knives, and drawing ink saw a rate hike from 12% to 18% to correct the inverted tax structure.
    • At the 49th GST Council meeting (Feb 18, 2023), pencil sharpeners were shifted back to 12%, restoring their earlier rate.

    GST RATE & HSN CODE FOR STATIONERY ITEMS – CHAPTER 96

    Most traditional stationery items fall under Chapter 96 of the HSN (Harmonized System of Nomenclature). Below is a list of items and their applicable GST rates:

    ProductHSN CodeGST Rate
    Slate pencils, chalk sticks9609NIL
    Slates9610 00 00NIL
    Postage stamps, postal stationery (excluding 4907)97045%
    Pencils, crayons, pastels, drawing charcoal960912%
    Pencil sharpeners (updated)821412%
    Ball pens, fountain pens, markers960818%
    Brushes, paint rollers (excl. twig brushes)960318%
    Ink pads, typewriter ribbons961218%
    Writing/drawing boards961018%
    Tripods, monopods, bipods962018%
    Date stamps, sealing stamps961118%

    GST ON PAPER-BASED STATIONERY – CHAPTERS 48 & 49

    Some stationery items, especially paper-based products, are classified under Chapters 48 and 49. Here’s a detailed breakdown post the 47th GST Council revisions:

    12% GST Items (Common for Education Use)

    Item DescriptionHSN Code
    Uncoated writing/printing paper, handmade paper4802
    Kraft paper/board (uncoated)4804
    Other uncoated paperboards4805
    Greaseproof paper4806 20 00
    Glassine paper4806 40 10
    Laminated/adhesive-bonded composite paper4807
    Corrugated or embossed paper4808
    Coated/decorative printed paperboard4810
    Stationery boxes, writing compendiums (paperboard)4817 30
    Exercise books, graph books, lab notebooks4820
    Printed maps, atlases, charts, globes (updated)4905

    18% GST Items (Processed or Specialized Paper Products)

    Item DescriptionHSN Code
    Tracing papers, vegetable parchment (excl. greaseproof, glassine)4806 (excl. 4806 20 00, 4806 40 10)
    Carbon/self-copy/transfer papers4809
    Surface-treated or decorated paperboards4811
    Transfer/copy paper for duplicators/offsets (excl. 4809)4816
    Postcards, envelopes, letter cards (not 4817 30)4817
    Office paper containers: trays, folders, files, cases4819
    Diaries, memo pads, receipt books, binders4820

    HSN Code for Notebook

    The HSN code for notebooks (including exercise books and diaries) is 4820. Products under this code generally attract 12% GST.

    GST ON METAL-BASED STATIONERY – CHAPTER 83

    Certain office and desk equipment made from base metals are classified under Chapter 83. These generally attract 18% GST, and include:

    Item DescriptionHSN CodeGST Rate
    Filing cabinets, paper trays, stamp stands (non-furniture)830418%
    Clips, index tags, loose-leaf binders, metal staples830518%
    Sign/name/address plates, letters, and symbols (metal)831018%
    Pencil sharpening machines847518%* (Pending reduction to 12%)

    GST RULES FOR SHOPKEEPERS

    Shopkeepers selling stationery or related services must follow these GST rules:

    • GST Registration: Required if turnover exceeds ₹40 lakhs (₹20 lakhs in some states).
    • Invoice Issuance: Must issue GST-compliant invoices with HSN codes.
    • Return Filing: Monthly or quarterly filing of GSTR-1 and GSTR-3B.
    • E-Way Bills: Required for transporting goods over ₹50,000 in value across states.
    • Display of GSTIN: Must be displayed at the place of business.

    GST ON PRINTING

    Printing services are taxable under GST. The applicable rate depends on the nature of service:

    • Printing with material (supply + service): 18%
    • Printing on customer-supplied material: Considered a service, usually taxed at 12% or 18%
    • Books and newspapers printing: May be exempt if classified under educational or public interest categories.

    RECENT CHANGES TO NOTE

    • Printing Ink, Drawing Ink, and Writing Ink: These now attract 18% GST (increased from 12% as per the 47th GST Council meeting).
    • Maps, Atlases, and Globes: Earlier exempt under printed material, these now attract 12% GST.
    • Pencil Sharpeners: Rate cut from 18% back to 12%, confirmed in the 49th GST Council meeting.

    IMPLICATIONS FOR BUSINESSES & CONSUMERS

    • Businesses dealing in stationery must ensure correct HSN classification to charge and claim the appropriate GST.
    • Educational institutions and corporates purchasing stationery for official use can avail Input Tax Credit (ITC).
    • End consumers, especially students and educators, may see price differences on items depending on material and classification.

    EXEMPT SUPPLY UNDER GST

    Exempt supplies are goods or services not subject to GST. While most stationery items are taxable, some educational supplies used directly by schools may be exempt under specific conditions. Additionally, books (other than exercise books or notebooks) are generally exempt supply under GST.

    CONCLUSION

    In conclusion, the implementation of GST has brought greater clarity to the taxation of everyday goods, including stationery. GST on stationery items has standardized tax rates but varies based on material and classification. For example, the GST rate for stationery items ranges from NIL on basic educational tools like chalk and slates, to 12% or 18% for items such as pens, folders, and office supplies. Accurate classification using the HSN code for stationery is crucial for businesses to ensure correct billing and seamless input tax credit claims. While most items are taxable, exempt supply under GST applies to certain educational goods and books, offering some relief to students and institutions.

    Additionally, GST rules for shopkeepers require compliance in registration, invoicing with HSN codes, return filing, and GSTIN display at business premises. Services like printing are also included in the tax framework, where GST on printing depends on whether the material is supplied by the printer or the client, typically taxed at 12% or 18%. For educational institutions and suppliers, understanding the HSN code for notebook, which is 4820 and attracts 12% GST, is particularly important. Staying informed about these classifications and rate changes is essential for both compliance and cost-effectiveness in business operations.