Free Press Journal

Cess on cigarettes hiked; prices to remain unchanged

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New Delhi : The GST Council on Monday raised the cess on cigarettes to take away an estimated Rs 5,000 crore annual “windfall” manufacturers could have reaped from lower GST rates, Finance Minister Arun Jaitley said on Monday.

However, cigarette prices will not change as a result of the increased cess which would be effective from midnight tonight. This was the first meeting of the Council after the Goods and Services Tax (GST) was rolled out on July 1.Briefing reporters after an emergency meeting of the Council was held through video conferencing, Jaitley said it had previously fixed a peak GST rate of 28 per cent on cigarettes. On top of it, a cess was levied to create a corpus for compensating states for any loss of revenue from implementing the GST, which subsumed over a dozen central and state levies. The cess was made up of 5 per cent ad valorem rate and a fixed per thousand stick rate based on length of cigarettes.

The peak GST rate of 28 per cent as also the 5 per cent ad valorem cess will continue but the fixed cess has been hiked in the range of Rs 485 and 792 per thousand sticks, he said.


The hike has been necessitated as the GST rate together with cess was found to be lower than the combined incidence of central excise, state VAT and other levies put together.