The government has set a maximum rate of GST compensating cess on pan masala, cigarettes, and other kinds of tobacco, with the highest rate tied to the retail sale price.

Share Market Live

NSE

The cess rate was capped as part of amendments to the Finance Bill 2023, which was passed by the Lok Sabha last Friday.

The maximum GST compensation cess rate for pan masala, according to the amendment, will be 51 percent of the retail sale price per unit. The current system levies a cess of 135 percent ad valorem.

Tobacco is priced at Rs 4,170 per thousand sticks plus 290 percent ad valorem or 100 percent of the retail sale price per unit.

The highest charge so far has been Rs 4,170 per thousand sticks plus 290 percent ad valorem.

The cess is levied in addition to the maximum Goods and Services Tax (GST) rate of 28 percent.

Changes in schedule-I of GST compensation cess Act, brought in via amendment in Finance Bill, has capped the maximum cess that can be charged on Pan masala and tobacco products.

Also read: Your restaurant bill is less in GST regime — govt explains with figures

The report of a panel of state finance ministers on stopping tax fraud in pan masala and gutkha industries was approved by the GST Council, which is chaired by Union Finance Minister Nirmala Sitharaman and is made up of state equivalents, in February.

To increase the first stage revenue collection, the GoM had suggested that the mechanism for levying the compensatory cess on pan masala and chewing tobacco be altered from an ad valorem levy to a particular rate-based charge.

Also read: The long road to GST 2.0 is bumpy and must be tread carefully