The notification is issued to reduce the Compensation Cess on specific supplies for exports. This step is aimed at promoting exports by reducing the cost burden on exporters, ensuring compliance with public interest objectives, and implementing the GST Council’s recommendations.

What is Compensation Cess?

The Compensation Cess is a special tax levied under the Goods and Services Tax (GST) system in India. It is primarily designed to compensate states for any potential revenue loss caused by the implementation of GST.

This notification exempts the intra-state and inter-state supply of taxable goods by a registered supplier to a registered recipient for export from the compensation cess under section 8, as in excess of the amount calculated at the rate of 0.1%.

This exemption is subject to several conditions:

• Goods must be supplied on a tax invoice and exported within 90 days of date of issue of tax invoice.
• The recipient must include the supplier’s GSTIN and invoice details in export documentation.
• The recipient must register with an Export Promotion Council or a Commodity Board recognized by the Department of Commerce.
• The register recipient must place an order on registered supplier for procuring goods at concessional-rate and a copy of same shall be shared with the supplier’s jurisdictional tax officer.
• Goods must move from the supplier to recipient:
  • Directly to the port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported; or
  • Directly to a registered warehouse from where the said goods shall be move to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported.
• Aggregated supplies from multiple suppliers must comply with specific movement and documentation requirements as described above.
• When goods have been exported, the registered recipient shall provide copy of shipping bill or bill of export containing details of Goods and Services Tax Identification Number (GSTIN) and tax invoice of the registered supplier along with proof of export general manifest or export report having been filed to the registered supplier as well as jurisdictional tax officer of such supplier.

The supplier must not avail the exemption if the recipient fails to export within the stipulated period.

This policy encourages exporters by lowering their tax liability through a reduced cess rate of 0.1%. It ensures proper tracking and compliance by mandating documentation and movement conditions, thereby fostering a streamlined export process.

This notification shall come into force with immediate effect.