What is luxury cess on Flipkart and Amazon?
What the cess line on your Flipkart or Amazon settlement means, why GST compensation cess ended in 2026, and what replaced it, from official GST sources.
Sellers sometimes see a cess column on a Flipkart or Amazon invoice, tax report or settlement, and wonder if it is another fee. It is not a marketplace fee. It is a tax, and for most sellers it no longer applies. Every legal point here comes from GST Council and government documents, checked 2 November 2026.
What is luxury cess?
Luxury cess is the everyday name for GST Compensation Cess. It was charged under the GST (Compensation to States) Act, 2017, on top of GST, on a short list of luxury and sin goods. The money went to compensate states for revenue they lost when GST began.
According to the GST Council’s September 2025 FAQs, goods that carried it included mid-size and big cars, coal, aerated and carbonated drinks, pan masala and tobacco products.
Like GST, the buyer paid it as part of the price. The seller collected it and paid it to the government. It was never a fee the marketplace charged you.
Is compensation cess still charged in 2026?
No. GST compensation cess was removed from 22 September 2025 for all goods except tobacco products and pan masala. Those kept it a little longer, until it was set to Nil from 1 February 2026.
| Date | What changed |
|---|---|
| 22 September 2025 | Cess removed on all goods except tobacco products and pan masala, such as cars, drinks and coal. The cess was merged into GST rates. |
| 1 February 2026 | Cess set to Nil on tobacco products and pan masala too. |
The first change came from the 56th GST Council meeting, where the Council decided to end the cess and merge it into GST so that the total tax on most goods stayed about the same. The second came through Notification 03/2025-Compensation Cess (Rate), dated 31 December 2025, summarised in the GST Council’s December 2025 newsletter.
Why does a cess line still show on my settlement?
A cess line today usually means one of two things:
- An older order, sold before 22 September 2025, or a return or adjustment linked to one.
- A tobacco or pan masala item sold before 1 February 2026.
If you see cess charged on a newer order, raise it with Seller Support and ask your accountant to check the invoice.
What replaced the cess?
For most of these goods, a higher GST rate. The 56th GST Council created a special rate of 40% for a few de-merit goods. Goods a marketplace seller might meet at 40% include:
- Drinks: aerated waters, drinks with added sugar, caffeinated drinks and carbonated fruit drinks
- Vehicles: most cars, except the small cars that moved to a lower rate, and motorcycles above 350 cc
- Tobacco: from 1 February 2026, pan masala, cigarettes and tobacco other than bidi
Pan masala and tobacco makers now also pay a separate levy charged at the factory. Those taxes fall on the manufacturer, not on your marketplace settlement.
Check your product’s HSN code against the current GST rate notification before you price. Your accountant can confirm the rate.
How does a 40% GST rate affect your price?
Example. You sell a product in the 40% GST slab for ₹1,400, GST included.
- Price without GST: ₹1,400 ÷ 1.40 = ₹1,000.00
- GST you pay to the government: ₹400.00
Only ₹1,000.00 is yours to cover marketplace fees, product cost and profit. That is why you always take GST out of the selling price first. Our guide on how to calculate real profit per order walks through the rest.
Is cess the same as TCS or TDS?
No. TCS and TDS are deducted by the marketplace from your payout, and you claim both back:
- TCS is 0.5% under GST, on the net value of your taxable sales (source).
- TDS: TDS on e-commerce payments is 0.1%, under Section 393(1) of the Income-tax Act, 2025 from 1 April 2026 (earlier Section 194-O). (source)
Cess was a tax on the product itself, paid by the buyer.
To see every line on a Flipkart settlement, read Flipkart seller payment terms and Flipkart seller fees, explained. For Amazon, see Amazon seller fees.
Frequently asked questions
What is cess on a Flipkart settlement?
It refers to GST Compensation Cess, a tax that used to apply on top of GST on some luxury and sin goods. It is not a Flipkart fee. A cess line today usually means an order from before 22 September 2025, or a tobacco or pan masala item sold before 1 February 2026.
Is GST compensation cess still applicable in 2026?
No. It was removed from 22 September 2025 for all goods except tobacco products and pan masala, and merged into GST rates. Tobacco products and pan masala kept it until it was set to Nil from 1 February 2026.
Which goods pay 40% GST now?
The 40% rate covers a few de-merit goods, such as aerated and sugary drinks, most cars, motorcycles above 350 cc and, from 1 February 2026, pan masala, cigarettes and tobacco other than bidi. Check your product's HSN code against the current GST rate notification.
Does cess reduce my profit?
No. Like GST, cess was paid by the buyer and passed on to the government by the seller. It was never your money. Take all taxes out of the selling price before you work out profit.