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The central government can increase GST on cigarettes and tobacco from 28% to 40% and add a excise duty to maintain revenue. The current total tax is 53%, which is 75% recommended below
In the 2022-23 financial year, tobacco products generated Rs 72,788 crore in tax revenue. (Representative/AP File)
The central government is considering increasing GST Cigarette And tobacco products to prevent tax reduction in tax revenue. Currently, in addition to 28% GST, other fees are levied, causing the total tax burden to 53%. However, it is much lower than 75% recommended by the World Health Organization (WHO).
The government is considering increasing the Goods and Services Tax (GST) on cigarette and tobacco products as the compensation cess imposed on these products is scheduled to end.
Currently, in addition to 28% GST, compensation cess and other charges are levied on cigarettes and tobacco products, resulting in a total tax of 53%. The government is considering increasing GST by 40% and imposing a separate excise duty.
Its purpose is to ensure that tax revenue from these products remains unaffected after the compensation cess is over. Effective until 31 March 2026, this cess will not be replaced with an option as it is considered ineffective, according to an official.
Cigarettes and tobacco products are classified as ‘sin goods’, which means that the products were considered harmful to health. Apart from GST, basic excise duty and national disaster contingency contingency contingency duties are also imposed on them.
The World Health Organization (WHO) recommends 75% tax on cigarettes. However, in India, the current tax rate is 53%. Tobacco and tobacco products represent an adequate source of tax revenue for the Government of India. In the 2022-23 financial year, these products generated Rs 72,788 crore in tax revenue.
Another option before the Central Government is to apply a health cess in place of compensation cess; However, some states oppose it. The central government is also not in favor of presenting any new cess.
The GST Council established a group of ministers (GOMs) to remove tobacco product taxation concerns. The group recommended the GST cess component to link the product to the maximum retail price (MRP) instead of the selling price. Groups on the fitment committee and rationalization of rates are currently reviewing the case.
