Compensation Cess on Cigarettes Up by
0.50 to 0.79 per Stick to make up for Revenue Shortfall
In pursuance of the recommendations of the GST
Council in its 14th Meeting held on 18.05.2017 and 19.05.2017, the
Compensation Cess rates under Section 8 (2) of the Goods and Services Tax
(Compensation to States) Act, 2017, was notified vide notification No.1/2017-Compensation Cess (Rate),
dated 28.06.2017 on Intra-State or Inter-State supply
of the specified goods, including cigarettes.
In
respect of cigarettes, the Fitment Committee had recommended that in line with
the weighted average VAT rate [28.7%], the GST rate on cigarettes may be kept
at 28%. In addition, Compensation Cess may be levied on cigarettes at rates
equal to 1.05 times the Specific Excise Duty Rates [net of NCCD]. However, this
method of calibrating the Compensation Cess did not take into consideration the
cascading of taxes [that is in earlier regime VAT being charged on value
inclusive of the excise duty]. As a result, the total tax incidence on
cigarettes in GST regime has
come down, as compared to the total tax in pre-GST regime.
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.
The
GST Council in its 19th Meeting held today i.e. on 17.07.2017
reviewed the Compensation Cess rates on cigarettes and recommended the
following increase in the same with effect from 00 hours on 18th July, 2017 i.e. the midnight of 17th and 18th July,
2017:
|
|
|
Compensation Cess Rates |
||
|
Tariff Item |
Present rate |
Proposed Increase |
New rates |
|
|
Non- filter |
||||
|
2402
20 10 |
Not
exceeding 65 mm |
5% +
Rs.1591 per thousand |
Rs.485
per thousand |
5% +
Rs.2076 per thousand |
|
2402
20 20 |
Exceeding
65 mm but not 70 mm |
5% +
Rs.2876 per thousand |
Rs.792
per thousand |
5% +
Rs.3668 per thousand |
|
Filter |
||||
|
2402
20 30 |
Not
exceeding 65 mm |
5% +
Rs.1591 per thousand |
Rs.485
per thousand |
5% +
Rs.2076 per thousand |
|
2402
20 40 |
Exceeding
65 mm but not 70 mm |
5% +
Rs.2126 per thousand |
Rs.621
per thousand |
5% +
Rs.2747 per thousand |
|
2402
20 50 |
Exceeding
70 mm but not 75 mm |
5% +
Rs.2876 per thousand |
Rs.792
per thousand |
5% +
Rs.3668 per thousand |
|
2402
20 90 |
Others |
5% +
Rs.4170 per thousand |
31% |
36% + Rs.4170 per thousand |