Cigarettes to cost more as GST Council okays higher cess rates

ITC share price registered a sharp fall Tuesday over higher India Tv

The GST Council in an emergency meeting on Monday hiked cess on cigarettes to ensure that overall taxes on them does not fall in the GST regime.

However, telecom minister Manoj Sinha said operators should pass on the benefit of input tax credit of 2% under GST, which will bring the effective tax rate for consumers to 16%.

"In respect of cigarettes, the Fitment Committee had recommended that in line with the weighted average Value-Added Tax rate (28.7%) the GST rate on cigarettes may be kept at 28%", the official statement said. For non-filter cigarettes, not exceeding 65 mm, the rate has been increased to 5 percent plus Rs 2,076 per thousand sticks from existing rate of 5 percent plus Rs 1,591.

While the ad valorem remains the same, the numerical amount depending on the length of cigarettes was increased here on Monday by the Council.

Filter cigarettes of 65 to 70 mm length would now attract a 5 percent plus Rs 2,747 per thousand stick cess as compared to present 5 percent plus Rs 2,126.

Length up to 65-70 mm: Increase of Rs 0.621 per cigarette.

"Now this rate (fixed by the fitment committee) when translated as a part of cost of the cigarette itself, indicated that the impact of the cascading effect has not been factored in". The same for 70 mm to 75 mm cigarettes would be 5 percent plus Rs 3,668 per thousand sticks.

The GST Council will meet next in the first week of August to review the progress of the new tax regime's implementation, Jaitley said.

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.

The meeting, called at a short notice, would be chaired by Finance Minister Arun Jaitley through video-conferencing as state Finance Ministers were not in the national capital.

"This figure is nearly multiplying everyday". "This is an operational issue. let us see how to resolve this", he said.

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