GST COUNCIL HIKES CESS ON CIGARETTES
The Goods and Services Tax (GST) Council on Monday decided to increase the cess on cigarettes to offset a reduced tax revenue from the product following the July 1 rollout of the indirect tax reform. Accordingly, the tax burden on cigarettes will go up by ₹4.8-₹7.9 per 10 sticks, depending on their length and whether or not they have filters. Finance minister Arun Jaitley, briefing reporters after the council meeting, said the increase in cess will benefit the exchequer by about ₹5,000 crore a year.
› Each state specifically responded positively (to the proposal) and this change will be effected from midnight (of Tuesday) ARUN JAITLEY, finance minister
NEWDELHI: The Goods and Services Tax (GST) Council on Monday decided to increase the cess on cigarettes to offset a reduced tax revenue from the product following the 1 July roll-out of the indirect tax reform.
Accordingly, the tax burden on cigarettes will goup by₹4.8-7.9 per 10 sticks, depending on their length and whether or not they have filters. Finance minister Arun Jaitley, who briefed reporters after the G ST Council meeting held via video conferencing, said the increase in cess will benefit the exchequer by about ₹5,000 crore a year.
“Each state specifically responded positively (to the proposal) and this change will be effected from midnight (of Tuesday),” said Jaitley.
The Council decided to meet on Monday, advancing its meeting scheduled for the first week of August, to address the issue. A statement issued after the Council meeting said the method of calibrating the GST compensation cess on cigarettes did not take into consideration the cascading of taxes in the earlier regime, which has now disappeared, thus leading to a reduction in the tax burden on the item.
In the earlier indirect tax regime, state level value-added tax used to be levied on the commodity which included the excise duty, resulting in a tax on tax. In the G ST regime, such anomalies have been removed.
“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 the statement, explaining the rationale behind the move.
Pratik Jain, partner and leader of the indirect tax practice at PwC India, said that more than the tactical move to increase the cess, the GST council meeting had shown its inclination and flexibility to take quick decisions.
“One would hope that a few other issues such as G ST rates on existing car leases, am bit of registered trademark for taxation of packed food products etc, are addressed in the next meeting,” said Jain.
Monday’s meeting was the first after the roll-out of the indirect tax reform. “So far, the functioning has been smooth. The central and state governments are addressing the queries being raised,” said Jaitley.
Pr ash ant Des hp an de, partner, De lo it te Haskins& Sells L LP, said implementation has so far been far smoother than anticipated, but the robustness of the information technology infrastructure supporting GST would be put to test at the time of filing of returns.