Delhi/Hyderabad | January 1 (Maxim News): The Central Government has announced a major revision in taxation on tobacco products, with a higher Goods and Services Tax (GST) rate set to come into force from February 1. As per a notification issued on Thursday, cigarettes, tobacco, and related products will now attract 40 percent GST, a significant increase from the earlier 28 percent.
However, the GST rate on bidis will remain unchanged at 18 percent, offering some relief to that segment.
Additional Cess on Pan Masala
In addition to the GST hike, the Centre has decided to impose a ‘Health and National Security Cess’ on pan masala and pan spices. Union Finance Minister Nirmala Sitharaman clarified that pan masala is already taxed at 40 percent GST and the newly introduced cess will be levied based on the production capacity of manufacturing units.
“The funds collected through this cess will be utilised for strengthening national security and public health infrastructure,” the Finance Minister stated.
Government’s Objective
The move is seen as part of the government’s broader strategy to discourage the consumption of tobacco products while simultaneously generating additional revenue for public welfare and security-related initiatives. Officials said the revised tax structure aims to address long-term health concerns linked to tobacco use.
Industry Concerns
Meanwhile, sources within the tobacco industry have expressed apprehension over the decision. Management representatives of several cigarette manufacturing companies fear that the sharp increase in GST and additional cess could lead to substantial financial losses, potentially impacting sales and profitability.
Industry observers also point out that higher taxation may result in increased retail prices, which could affect consumer demand in the coming months.
Effective Date
The revised GST rates and additional cess provisions will come into effect from February 1, as per the notification issued by the Central Government. (Maxim News)
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