To correct duty anomaly, GST Council hikes cess on cigarettes

Elias Hubbard
July 18, 2017

The drop-in share price of cigarette manufacturing companies is on the back of speculations that the government may consider hiking the compensation cess on cigarettes if prices come down post the implementation of the Goods and Services Tax (GST). Announcing this Tamil Nadu Finance Minister D Jayakumar, who participated in the meeting through video-conferencing, said during the meeting the proposal to increase the levy of cess on cigarettes was discussed.

"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", Jaitley explained. Under the new indirect tax regime, cigarettes fall in the highest 28 per cent bracket and attract an additional cess depending on their length.

Hence, it made a decision to increase the compensation cess on all cigarettes.

For other cigarettes, the cess would be 36 per cent plus Rs 4,170 per thousand sticks as compared to 5 per cent plus Rs 4,170 now.

Earlier, Tobacco Institute of India (TII) had said that the GST is an unique opportunity for the government to address the growing illegal cigarettes trade in the country. Sources said cigarettes were the only item of discussion in Monday's GST Council meeting which reviewed the roll out. The meeting of the Council was originally slated to happen on August 5. From this it comfortably looks like that the original number of applicants which included duplication. which was 80 lakh, I think we are nearly on the verge of crossing that figure.

Expressing satisfaction over the rollout of GST from July 1, he said that high registrations have begun to indicate an increase in the tax payer base.

"In a large number of products we have seen that input credit helps in bringing down the cost", he said.

Other reports by Click Lancashire

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