GST Council raises cess on cigarettes

GST impact on cigarettes GST impact on cigarettes news gst on cigarettes cigarettes gst gst on cigarette gst gst india gst rollout gst impact arun jaitley

GST impact on cigarettes GST impact on cigarettes news gst on cigarettes cigarettes gst gst on cigarette gst gst india gst rollout gst impact arun jaitley

The GST Council had earlier fixed a peak rate of 28 per cent on cigarettes along with a cess, which consisted of an ad valorem rate of 5 per cent and a fixed amount per thousand sticks, based on length of cigarettes.

The Goods and Services Tax Council on Monday afternoon increased the compensation cess on cigarettes to ensure that the tax incidence does not fall under the new indirect tax regime.

He further said, "There were two things that the cigarette companies could do - either reduce the price of cigarette, which because of the health consequences of cigarettes is not a very desirable thing".

Up to 65 mm length: Increase of Rs 0.485 per cigarette.

Sources said cigarettes were the only item of discussion in Monday's GST Council meeting which reviewed the roll out. This is mostly because the additional excise duty was dropped under the GST, they added. In the GST regime, such anomalies have been removed.

Jaitley said while any reduction in tax incidence on items of mass consumption would be welcome, the same would be unacceptable in the case of demerit goods like cigarettes.

After GST rollout, the fall in total tax on tobacco products, which is risky to health, is worrisome for the government. He said the GST Council noticed this "lacunae" and convened an early meeting and a unanimous decision was taken after taking views of all states.

Jaitley had fixed August 5, as the date for the Council's next meeting.

"So far, the functioning has been smooth".

Vishal Raheja, senior consultant, Taxmann, a tax services provider, said the increase in cess will push up prices of cigarettes considerably.

"28% tax on cigarettes remains, 5% ad valorem remains and the cess changes as per the length of the cigarettes", the finance minister said. "The central and state governments are addressing the queries being raised", said Jaitley.