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.

Addressing the media post the 19th meeting of the GST Council, Jaitley said that while the ad valorem remains the same; the numerical amount for each category of non-filtered cigarettes (under 65mm, 65-70mm, 70-75mm) has been increased by Rs. 485 per 1000, Rs. 621 per 1000 and Rs. 792 per 1000 respectively.

Also, the filter cigarettes, under 65mm, will attract a five percent ad valorem plus on Rs. 2076 per 1000, while those between 65 to 70mm will attract a five percent plus on Rs. 3688 per 1000.

"The fitment committee and council had fixed the rate to be 28 percent plus a compensation of cess, in two parts, as 5 percent ad valorem plus an additional charge on each category. After 15 days, it was indicated that the impact of cascading effect was not factored adequately, which resulted in windfall profit for companies, which they eventually transferred to the balance sheet. This was not the objective of the council. Therefore, the meeting was convened to make amendments, which will be effective post midnight today," he said.

In the meeting, which was held as a video conference, it was also decided that the fourth category of filter cigarettes will attract a 31 percent increase in ad valorem.

"With all changes in place, we believe that the total revenue gained will be around Rs. 5,000 crore," added Jaitley.

Speaking on increase in the number of migrants from Value Added Tax (VAT) and excise duty, Jaitley highlighted that the number has crossed 70 lakhs, with an additional five lakh new applications and 2.5 lakh applications awaiting approval.