In view of the reduction in tax incidence on cigarettes, the GST Council on July 17, 2017 raised the compensation cess rates on the demerit good.
Finance Minister Arun Jaitley said that, “In first 15 days of GST implementation, it was noted that the 28 per cent tax rate plus compensation cess on cigarettes when translated, the impact of cascading effect had not adequately factored in, resulting in windfall gain for the cigarette companies”.
Now the tax rate on cigarette remains at 28 per cent, the ad valorem at 5 per cent with the numerical amount on each category of filtered and non-filtered cigarettes being raised to Rs 2,076 per 1,000 units, Rs 2,747 per 1,000 and Rs 3,668 per 1,000 of different categories of cigarettes.
For other cigarettes the ad valorem has been increased to 36 per cent plus Rs 4,170 per 1,000 units.
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