The Central Board of Indirect Taxes and Customs (CBIC) has issued Notification No. 02/2025-Compensation Cess (Rate) dated September 17, 2025, completely eliminating GST Compensation Cess on 19 major product categories including automobiles, beverages, coal, and luxury items. The 56th meeting of the GST Council was held on September 03, 2025 in New Delhi under the chairpersonship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman, where the GST Council inter-alia made the recommendations relating to changes in GST tax rates. This comprehensive reform will benefit consumers across multiple sectors with significant price reductions expected on cars (cess reduced from 1% to 22% depending on category), soft drinks (12% cess removed), coal (₹400 per tonne cess removed), motorcycles above 350cc (3% cess removed), and luxury items like yachts and personal aircraft.
The notification covers a wide spectrum of products from daily essentials to luxury goods. In the automobile sector, all categories of passenger vehicles will see cess elimination – from small petrol cars that previously attracted 1% cess to luxury SUVs that carried 22% compensation cess. Hybrid vehicles with both combustion engines and electric motors will also benefit from the 15% cess removal. The beverage industry will see relief with aerated waters, lemonade, caffeinated beverages, and carbonated fruit drinks getting complete cess exemption. The energy sector will particularly benefit as coal, lignite, and peat will no longer attract the ₹400 per tonne compensation cess, potentially reducing energy costs across industries.
Schedule
| S. No. | Chapter / Heading / Sub-heading / Tariff item | Description of Goods | Rate of goods and services tax compensation cess |
| (1) | (2) | (3) | (4) |
| 2. | 2202 10 10 | Aerated waters | 12% to NIL |
| 3. | 2202 10 20 | Lemonade | 12% to NIL |
| 4. | 2202 10 90 | Others | 12% to NIL |
| 4A. | 22029990 | Caffeinated Beverages | 12% to NIL |
| 4B. | 2202 | Carbonated Beverages of Fruit Drink or Carbonated Beverages with Fruit Juice. | 12% to NIL |
| 39. | 2701 | Coal; briquettes, ovoids and similar solid fuels manufactured from coal. | ₹ 400 per tonne to NIL |
| 40. | 2702 | Lignite, whether or not agglomerated, excluding jet | ₹ 400 per tonne to NIL |
| 41. | 2703 | Peat (including peat litter), whether or not agglomerated | ₹ 400 per tonne to NIL |
| 42. | 8702 10, 8702 20, 8702 30, 8702 90 | Motor vehicles for the transport of not more than 13 persons, including the driver, other than the vehicles of the description mentioned in S. No. 50 and 51 | 15% to NIL |
| 47 | 8703 40,
8703 60 |
Following Vehicles, with both spark-ignition internal combustion reciprocating piston engine and electric motor as motors for propulsion; | |
| (a) Motor vehicles cleared as ambulances duly fitted with all the fitments, furniture and accessories necessary for an ambulance from the factory manufacturing such motor vehicles | NIL | ||
| (b) Three wheeled vehicles | NIL | ||
| (c) Motor vehicles of engine capacity not exceeding 1200cc and of length not exceeding 4000 mm | NIL | ||
| (d) Motor vehicles other than those mentioned at (a), (b) and (c) above. | 15% to NIL | ||
| Explanation.- For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under. | |||
| 48 | 8703 50,
8703 70 |
Following Vehicles, with both compression-ignition internal combustion piston engine [diesel-or semi diesel] and electric motor as motors for propulsion; | |
| (a) Motor vehicles cleared as ambulances duly fitted with all the fitments, furniture and accessories necessary for an ambulance from the factory manufacturing such motor vehicles | NIL | ||
| (b) Three wheeled vehicles | NIL | ||
| (c) Motor vehicles of engine capacity not exceeding 1500 cc and of length not exceeding 4000 mm | NIL | ||
| (d) Motor vehicles other than those mentioned at (a), (b) and (c) above. | 15% to NIL | ||
| Explanation.- For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under. | |||
| 50. | 8702, 8703 21 or 8703 22] | Petrol, Liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven motor vehicles of engine capacity not exceeding 1200cc and of length not exceeding 4000 mm.
Explanation.- For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under. |
1% to NIL |
| 51. | 8702, 8703 31 | Diesel driven motor vehicles of engine capacity not exceeding 1500 cc and of length not exceeding 4000 mm.
Explanation.- For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under. |
3% to NIL |
| 52 | 8703 | Motor vehicles of engine capacity not exceeding 1500 cc | 17% to NIL |
| 52A | 8703 | Motor vehicles of engine capacity exceeding 1500 cc other than motor vehicles specified against entry at S. No 52B | 20% to NIL |
| 52B | 8703 | Motor vehicles known as Utility Vehicles, by whatever name called including Sports Utility Vehicles (SUV), Multi Utility Vehicles (MUV), Multi-purpose vehicles (MPV) or Cross-Over Utility Vehicles (XUV), with engine capacity exceeding 1500 cc; Length exceeding 4000 mm and Ground Clearance of 170 mm and above.
Explanation: For the purpose of this entry, the Ground Clearance means ground clearance in unladen condition. |
22% to NIL |
| 53. | 8711 | Motorcycles of engine capacity exceeding 350 cc. | 3% to NIL |
| 54. | 8802 or 8806 | Other aircraft (for example, helicopters, aeroplanes), for personal use. | 3% to NIL |
| 55. | 8903 | Yacht and other vessels for pleasure or sports | 3% to NIL |
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2025/09/N-No.-02-2025-Compensation-Cess-Rate.pdf
