GST Panel Rejects Proposal For Reducing Tax On Tobacco Products
According to reports, the industry has requested a consistent additional compensation cess on cigarettes, bidis, smokeless tobacco products, and/or lower compensation cess on cigarette sticks up to 70 mm
Ahead of the Goods and Services Tax (GST) Council meeting on 7 October, an officer’s panel of the Council has rejected industry proposals to reduce tax on tobacco products.
The decision signifies a conscious choice by the Council to prioritise public health over the economic interests of the tobacco industry. According to reports, by maintaining higher tax rates on these products, the GST Council aims to dissuade individuals from purchasing and consuming tobacco, thereby reducing its overall prevalence and associated health risks.
According to reports, the industry has requested a consistent additional compensation cess on cigarettes, bidis, smokeless tobacco products, and/or lower compensation cess on cigarette sticks up to 70 mm.
Suggesting the status quo, the Council’s Fitment committee has rejected the proposal.
When determining the Compensation Cess rates for tobacco and tobacco products, it was determined that the GST rate on cigarettes would remain at 28 per cent in accordance with the weighted average VAT rate of 28.7 per cent. Bidis are subject to a 28 per cent GST rate, however there is no corresponding Compensation Cess.
It may be recalled that in the Union Budget for FY24, the National Calamity Contingent Duty (NCCD) rate on specified cigarettes was raised by around 16 per cent with effect from 2 February, 2023.