Last Updated: April 09, 2023, 14:08 IST
In February, the GST Council, chaired by Union Finance Minister 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.
This is a departure from the sooner regime that imposed cess, over and above the 28 per cent Goods and Services Tax (GST) fee on ad-valorem foundation
The authorities has specified the retail sale price-based GST cess fee that may be levied on pan masala and tobacco producers with impact from April 1. This is a departure from the sooner regime that imposed cess, over and above the 28 per cent Goods and Services Tax (GST) fee on ad-valorem foundation.
As per a finance ministry notification dated March 31, the GST cess fee that may be relevant on pan masala is 0.32 occasions the retail sale value (RSP) of the pan masala pouch. Pan masala, containing tobacco gutkha, now has a cess fee of 0.61 occasions the RSP, whereas the speed for smoking mixtures for pipes and cigarettes is 0.69 occasions.
Chewing tobacco , filter khaini, and jarda scented tobacco entice a cess of 0.56 occasions the RSP, and the speed for branded unmanufactured tobacco and hookah or gudaku is 0.36 occasions the RSP. The new charges are relevant from April 1, 2023. Moving to RSP-based levy would imply that producers would now should pay the cess on the ultimate retail value of masala and chewing tobacco on the time it crosses the manufacturing facility gate.
This would assist curb tax evasion because the cess could be collected on the first level itself.
AMRG & Associates Senior Partner Rajat Mohan mentioned transferring to an RSP-based system can present a extra secure income for the federal government in case of damaged provide chains.
“In the new taxation scheme, the entire cess is collected at the first point of sale, i.e., the manufacturer itself, limiting the impact of tax evasion in the sector,” Mohan mentioned.
The estimated income from RSP-based cess fee on pan masala and tobacco is sort of on the similar stage as was within the earlier ad- valorem regime.
However, within the earlier regime since there have been situations of tax evasion, the income assortment was decrease. The authorities final month amended the GST legislation and capped the utmost fee of GST compensation cess that may be levied on pan masala, cigarettes and different types of tobacco, linking it to the RSP of the product.
The most GST compensation cess fee for pan masala will probably be 51 per cent of the RSP per unit. Till March 31, the cess was charged at a most fee of 135 per cent ad-valorem. The most fee for tobacco has been fastened at Rs 4,170 per thousand sticks plus 290 per cent ad-valorem or 100 per cent of the retail sale value per unit. Till March 31, the best fee was Rs 4,170 per thousand sticks plus 290 per cent ad-valorem.
In February, the GST Council, chaired by Union Finance Minister 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 really useful that the mechanism for levy of compensation cess on pan masala and chewing tobacco be modified from ad-valorem to a selected rate-based levy to spice up the primary stage assortment of the income.
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