Cigarettes get costlier? GST Council raises cess to fix tax anomaly

Changes applicable from midnight of July 17, govt to gain Rs 5,000 in revenue annually

The Goods and Services Tax (GST) Council on Monday raised the cess on cigarettes over the peak rate of 28 per cent as the effect on their prices was lower under the new taxation regime than earlier. The increase will give the government Rs 5,000 crore more in revenue which would be used for compensating states.

 

The peak GST rate of 28 per cent and ad valorem cess of 5 per cent would remain, Finance Minister Arun Jaitley announced after the meeting, conducted through video conferencing. However, specific cess on the basis of the length of cigarettes would be raised from midnight Monday.

 

“It was noted in the first 15 days of the GST implementation that when the rate on cigarettes was translated, the cascading effect of taxes was not factored in. We noted that cigarette companies were getting windfall profit from reduction in cigarette prices, Jaitley said.