GST cess on cigarettes increased, but prices likely to remain unchanged

Pauline Gross
July 17, 2017

"GST council in its meet reviewed compensation cess rates on cigarettes and recommended increase in the same", Jaitley added. Announcing this Tamil Nadu Finance Minister D Jayakumar, who participated in the meeting through video-conferencing, said during the meeting the proposal to increase the levy of cess on cigarettes was discussed. Jaitley said the anomaly in fixing the rates of cigarettes by the GST Council had brought down the total tax incidence on cigarettes post-GST.

GST and cess combined on cigarettes is now 6-8 percent lower than pre-GST regime. Under the new indirect tax regime, cigarettes fall in the highest 28 per cent bracket and attract an additional cess depending on their length.

ITC shares fell almost 3 percent intraday Monday on fears of likely increase in cess on cigarettes. The Council had last met on June 30 and had originally scheduled its next meeting for August 5.

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The fixed tax will be raised between Rs 485 and Rs 792 per thousand sticks from midnight Monday.

Consumer prices will, however, not change as the increased tax incidence would only take away the windfall profits the manufacturers were earning, the finance minister said. This was the 19th meeting of the GST Council but the first since the rollout of the new levy. From this it comfortably looks like that the original number of applicants which included duplication. which was 80 lakh, I think we are nearly on the verge of crossing that figure. The finance minister said the roll out had been fairly smooth and both the Centre and states were responding to queries by stakeholders on a real time basis.

Asked if the tax rates on textiles would be reduced, Jaitley said the Council would consider all the suggestions.

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