New Delhi: In the 56th GST Council meeting, the government is planning to change how taxes are calculated on sin goods like pan masala, chewing tobacco, and cigarettes.
Current System
Right now, GST and cess are charged based on the transaction value — the price at which a dealer sells to a retailer.
What is the New Proposal?
Now, the MRP (Maximum Retail Price) printed on the packet will be used to calculate taxes. A flat 40 percent GST + cess may be charged on that MRP.
The council may also decide whether to add extra levies or cess on these products.
Why This Change?
There is a lot of tax evasion in this category. Dealers often hide the real value to avoid higher taxes. By using MRP as the tax base, the government aims to stop this loophole.
How Will This Affect the Market?
Companies like ITC, which make cigarettes and tobacco products, may feel short-term pressure as their prices might rise due to higher tax. But in the long run, it will make the tax system clearer and more stable.
What Does This Mean for Investors?
Tobacco products have inelastic demand, which means people still buy them even if prices go up. So, any drop in ITC or similar stocks could be a buying opportunity, as they usually recover over time.
