Starting from April 1, 2023, the Indian government has set the maximum rate or limit of GST Compensation Cess on tobacco products such as cigarettes and pan masala. The government has linked the GST Compensation Cess to the ceiling rate of their retail selling price among other items. This move was made as part of the amendments introduced in the Finance Bill 2023, which was passed by the Lok Sabha on Friday.
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Under the new rules, pan masala will attract a maximum GST compensation cess of 51 percent of the retail sale price per unit, replacing the current 135 percent duty charged on the product. The tariff for tobacco, meanwhile, has been set at Rs. 4170 per 1,000 sticks plus 290 percent ad valorem, or 100 per cent of the unit’s retail sale price.
It is important to note that the cess will be levied on top of the highest GST rate of 28 percent. The limit on pan masala, cigarettes, and other tobacco products has been set based on one of the 75 amendments made in the Finance Bill, which was passed by the Lok Sabha on March 24.
Tax experts have suggested that following this change by the government, the GST Council will need to issue a notification for the assessment of the compensation cess applicable. This move is expected to have a significant impact on the tobacco industry and its consumers in India.
