GST cess on cigarettes up

GST Council in an emergency meeting on Monday hiked cess on cigarettes to ensure that overall taxes on them does not fall in the GST regime.

The move will bring in `5,000 crore of additional tax revenue to the Centre government.

GST Council had earlier not taken into account the cascading impact of taxes on cigarettes due to which total tax incidence in new GST regime had come down as compared to pre-GST era.

Anti-tobacco groups had also warned government against fall in taxes on cigarettes as it could have adverse impact on health of the people.

The GST Council in an emergency meeting on Monday hiked cess on cigarettes to ensure that overall taxes on them does not fall in the GST regime.

GST Council meeting on tax on tobacco was held through video conference showing the pressure on the government to act on the cigarettes issue. Tax on cigarettes was the only agenda for the GST Council meet.

“While any reduction in tax incidence on items of mass consumption would be welcome, the same would be unacceptable in case of demerit goods like cigarettes,” said finance ministry.

GST Council has increased fixed component of cess on cigarettes category by `485 to `792 per thousand sticks of cigarettes.

This is over an above present GST of 28 per cent, 5 per cent ad valorem cess and a fixed cess on cigarettes. The fixed cess varies depending on length and whether cigarettes are filter or non-filter.

The cess will be used by Centre to compensate states for any loss of revenue due to roll-out of GST. “Now the total revenue gain of this is estimated to be about `5,000 crore per annum and this gain otherwise would have either resulted in reduction of cigarette prices or would have gone as balance profit to the cigarette companies,” said finance minister Arun Jaitley.