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While the cess rates seems exorbitant, the GST council clarified that the high cess would not mean an increase in the price of cigarettes.
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.
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