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The authorities has capped the maximum rate of GST compensation cess that might be levied on pan masala, cigarettes, and different types of tobacco and linked the very best rate to their retail sale price.
The capping of the cess rate was introduced in as a part of the amendments to the Finance Bill, 2023, which was handed by the Lok Sabha final Friday.
As per the modification, the maximum GST compensation cess rate for pan masala can be 51% of the retail sale price per unit. In the present regime, the cess is charged at 135% advert valorem.
The rate for tobacco has been fastened at ₹4,170 per thousand sticks plus 290% advert valorem or 100% of the retail sale price per unit.
So far, the very best rate was ₹4,170 per thousand sticks plus 290% advert valorem.
The cess is levied over and above the very best Goods and Services Tax (GST) rate of 28%.
Changes in schedule-I of GST compensation cess Act, introduced in by way of modification in Finance Bill, has capped the maximum cess that may be charged on Pan masala and tobacco merchandise.
Tax consultants, nonetheless, mentioned to verify the precise compensation cess relevant following this transformation, the GST council will want to situation a notification.
AMRG & Associates Senior Partner Rajat Mohan mentioned the most recent modification within the GST Compensation cess legislation is an enabler that may allow the GST council to introduce relevant tax charges by 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,” Mr. Mohan mentioned.
In February, the GST Council chaired by Union Finance Minister Nirmala Sitharaman and comprising state counterparts, had authorized the report of a panel of state finance ministers on plugging tax evasion in pan masala and gutkha companies.
The GoM had advisable that the mechanism for levy of compensation cess on pan masala and chewing tobacco be modified from advert valorem to a particular rate-based levy to enhance the primary stage assortment of the income.
