GST Council hikes Cess rates

GST Council recently increased the cess on cigarettes.

The tax will be raised between Rs 485 and Rs 792 per thousand sticks. Cigarette prices had dropped after GST was implemented on July 1.

The peak GST rate of 28% and an ad valorem cess – which is levied in proportion to the estimated value of the goods – of 5% will remain, Finance Minister Arun Jaitley said after an emergency meeting with the council recently.

“It was noted in the first 15 days of the GST implementation that when the rate on cigarettes was translated, the cascading effect of taxes was not factored in,” Jaitley explained.,“We noted that cigarette companies were getting windfall profit from a reduction in cigarette prices,”  in a statement.

The hike will give the government Rs 5,000 crore more in revenue, which would have otherwise gone to the manufacturers. “Now, the total revenue gain from this is estimated to be about Rs 5,000 crore per annum,” Jaitley said, according to a media report. “This gain, otherwise, would have either resulted in reduction of cigarette prices or would have gone as balance profit to the cigarette companies.”

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.

*The increase will give the government Rs 5,000 crore more in revenue, which otherwise would have gone to the manufacturers.