The Goods and Services Tax Council, on Monday, decided to increase the cess applied on cigarettes by as much as 31% in certain categories, effective from Tuesday.
The cess on these items is over and above the 28% GST rate applied to them.
“In respect of cigarettes, the Fitment Committee had recommended that in line with the weighted average VAT rate (28.7%) the GST rate on cigarettes may be kept at 28%,” the official statement said. “In addition, Compensation Cess may be levied on cigarettes at rates equal to 1.05 times the specific excise duty rates (net of NCCD).”
“However, this method of calibrating the compensation cess did not take into consideration the cascading of taxes (that is in earlier regime VAT being charged on value inclusive of the excise duty),” the statement added. “As a result, the total tax incidence on cigarettes in GST regime has come down, as compared to the total tax in pre-GST regime.”
The statement said while any reduction in the tax incidence on items of mass consumption would be welcome, the same would be unacceptable in case of demerit goods like cigarettes.
Hence, it decided to increase the compensation cess on all cigarettes. For example, non-filtered cigarettes not exceeding 65 mm in length will see the cess levied on them increase from the current 5% + ₹1,591 per thousand to 5% + ₹2,076 per thousand.
The filtered variants of cigarettes of this size will witness the same change in the cess levied.
