GST Council may go for more rate revisions

GST Impact Compensation Cess Increased on Cigarettes Smoking to Become Costlier

GST Impact Compensation Cess Increased on Cigarettes Smoking to Become Costlier

In an urgent meeting of the Goods and Services Tax (GST) Council on Monday, the first after the GST rollout and 19th in total, the Centre and the states made a decision to increase the cess on cigarettes to remove the anomaly of lower effective tax incidence that had followed after the recent scrapping of additional excise duty on cigarettes. A peak GST rate of 28% and an ad valorem cess, which is levied in proportion to the estimated value of the goods, of 5% will remain, Finance Minister Arun Jaitley said after an emergency meeting with the council. If the price of cigarettes come down, the government may not look at levying central excise duty but may consider increasing the cess on the demerit good. "We noted that cigarette companies were getting windfall profit from a reduction in cigarette prices", the Business Standard reported. "This was not the intention of the Council".

Earlier, Tobacco Institute of India (TII) had said that the GST is an unique opportunity for the government to address the growing illegal cigarettes trade in the country.

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

However, cigarette manufacturing companies are yet to revise prices post GST.

ITC shares fell almost 3 percent intraday Monday on fears of likely increase in cess on cigarettes.

Accordingly, the tax burden on cigarettes will go up by Rs4.8-7.9 per 10 sticks, depending on their length and whether or not they have filters. The same for 70 mm to 75 mm cigarettes would be 5 per cent plus Rs 3,668 per thousand sticks. "This figure is nearly multiplying every day".

"The agenda is some rate issue", she said. "I think it is a rate issue".

Sources said cigarettes were the only item of discussion in Monday's GST Council meeting which reviewed the roll out.

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