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GST Announces Cess Rates on Tobacco Products and Pan Masala

Updated on: Jun 22nd, 2021

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4 min read

The Goods and Service Tax Council on Thursday decided to limit the rate of cess on tobacco products at INR 4,170 per 1,000 sticks or 290 % ad valorem. The council also capped the rate of cess on pan masala at 135% ad valorem. The cess will be imposed over and above the GST to be levied on these products.Krishna Byre Gowda, a member of the GST Council representing Karnataka, illuminated that high cess will not necessitate a rise in cigarettes prices.

“On comparing the present tax structure, the Goods and Service Tax together with the cess would only modify the structure of the taxes on the tobacco products, there would be as such no surge in the tax rates for tobacco products because of GST,” he explained. Though, he supplemented that there might disparity among the states with respect to the taxation of tobacco.

No cess on bidis?
The Goods and Service Tax Council, as of now, has postponed its decision to levy cess on bidis for want of consensus among the council members. The Kerala Finance Minister, Isaac Thomas, is one of those in favour of no cess for this industry as he says that in case cess is levied on bidis, several people will be unable to find a source of living. Thomas further added that most of the states will be against imposition of any extra cess on bidis.

Nevertheless, Gowda had the opinion that bidis are mostly consumed by the poor and are very injurious to their health, thus justifying the levying of a hefty cess.The GST Council has provided a cap of 15% on the cess for aerated drinks and luxury cars. We still need to wait for the Council to provide a proper definition of luxury car. The Council also took this opportunity to cap the cess for coal at INR 400 per ton.

Getting GST-ready before July 1 2017

As a business now is the time to take the first steps to becoming GST-ready. This way, when the change comes, you will not be caught off guard! So, what can you do to be prepared for GST? Glad you asked:

  1. Get your enrolment done on time. To read more about the enrolment process and its relevance, Click here.
  2. Plan your logistics and warehousing requirement carefully. To read our detailed guide on impact analysis on logistics and warehousing, Click here.
  3. Adopt such platforms, technologies which will enable your business to be GST-compliant. Click here to get all updates and access a pool of GST Calculators.

Want an expert to explain GST to you? Get one, right here

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Quick Summary

The GST Council capped cess rates on tobacco products and pan masala, considered no cess on bidis due to impact on livelihood, provided caps for aerated drinks, luxury cars, and coal. Businesses were advised to prepare for GST implementation before July 1, 2017.

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