GST Council hikes cess on cigarettes

Correcting an anomaly in rate setting by the GST Council the government Monday increased cess rates on cigarettes which had become cheaper after implementation of Goods and Services Tax from July 1. DH file

GST on cigarettes to remain 28 percent, clarifies Jaitley

Clearing the air regarding the final Goods and Services Tax (GST) rate levied on cigarettes, Finance Minister Arun Jaitley on Monday reiterated that the earlier proposed figure of 28 percent will remain and so will the five percent ad valorem, as part of the compensation cess, effective midnight.

The GST Council has recommended raising the compensation cess on cigarettes.

Briefing reporters after an emergency meeting of the Council was held through video conferencing, Jaitley said it had previously fixed a peak GST rate of 28 per cent on cigarettes.

Jaitley said the anomaly in fixing the rates of cigarettes by the GST Council had brought down the total tax incidence on cigarettes post-GST.

"28% tax on cigarettes remains, 5% ad voleram remains and the cess changes as per the length of the cigarettes", the finance minister 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)".

But this rate was lower than the pre-GST tax incidence and the choice before manufacturers was either to pass on the lower taxes to consumers by way of cutting rates or pocketing the windfall.

The manufacturers chose the latter.

Length up to 65-70 mm: Increase of Rs 0.621 per cigarette. Sources said cigarettes were the only item of discussion in Monday's GST Council meeting which reviewed the roll out.

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