Center Caps Maximum GST Cess On Pan Masala And Tobacco, Links Highest Rate To Retail Price

The maximum GST compensation cess rate for pan masala will be 51 per cent of the retail sale price per unit, as per the amendment

The cap of the cess rate was brought in as one of 64 amendments brought into the Finance Bill, 2023. ( Image Source :Sansad TV )

Center has capped the maximum rate of GST compensation cess that would be levied on pan masala, cigarettes, and other forms of tobacco, reported news agency PTI. The report said that the cap was brought in as one of 64 amendments brought into the Finance Bill, 2023. It was passed by the Lok Sabha last Friday.

The GST compensation cess on these tobacco products has been linked to the highest rate of their retail sale price. The maximum GST compensation cess rate for pan masala will be 51 per cent of the retail sale price per unit, as per the amendment, the report said. The cess of pan masala is charged at 135 per cent ad valorem, as of now. 

The rate for tobacco has been fixed at Rs 4,170 per thousand sticks plus 290 per cent ad valorem or 100 per cent of the retail sale price per unit. As of now, the highest rate was Rs 4,170 per thousand sticks plus 290 per cent ad valorem, the report said. The cess is levied over and above the highest Goods and Services Tax (GST) rate of 28 per cent.

The maximum cess that can be levied on Pan masala and tobacco goods has been capped as an amendment to schedule-I of the GST compensation cess Act. It was brought as an amendment to the Finance Bill 2023. 

AMRG & Associates Senior Partner Rajat Mohan told PTI that the latest amendment in the GST Compensation cess law is an enabler that will permit the GST council to introduce applicable tax rates through a notification.

"This change marks a significant shift in taxation policy for pan masala and tobacco-supplying companies. Though this policy will arrest tax evasion to a great extent in this sector, it still may prove to be a regressive plan from an economic standpoint," Mohan said.

The report of a Group of Ministers on stopping tax evasion in pan masala and gutkha industries was approved by the GST Council, which is chaired by Finance Minister Nirmala Sitharaman. 

To increase the 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.

Custom Duty Hike On X-Ray Import

The government has also hiked the customs duty on the import of X-ray machines and non-portable X-ray generators to 15 per cent with effect from April 1. This change was also brought in through as amendments to the Finance Bill, 2023, reported PT.  

As of now, portable X-ray machines and non-portable X-ray generators and apparatus attract a 10 per cent import duty. Rajat Mohan told PTI this is intended to improve barriers to manufacturing in India.