New regime of GST cess rate for pan masala, tobacco

 

 

 

 

THE Government has specified the retail sale price-based GST cess rate that would be levied on pan masala and tobacco manufacturers with effect from April 1. This is a departure from the earlier regime that imposed cess, over and above the 28 per cent Goods and Services Tax (GST) rate on ad-valorem basis. As per a Finance Ministry notification dated March 31, the GST cess rate that would be applicable on pan masala is 0.32 times the retail sale price (RSP) of the pan masala pouch. Pan masala, containing tobacco gutkha, now has a cess rate of 0.61 times the RSP, while the rate for smoking mixtures for pipes and cigarettes is 0.69 times. Chewing tobacco, filter khaini, and jarda scented tobacco attract a cess of 0.56 times the RSP, and the rate for branded unmanufactured tobacco and hookah or gudaku is 0.36 times the RSP. New rates are applicable from April 1, 2023.

 

Moving to RSP-based levy would mean that manufacturers would now have to pay the cess on the final retail price of masala and chewing tobacco at the time it crosses the factory gate. This would help curb tax evasion as the cess would be collected at the first point itself. AMRG & Associates Senior Partner Rajat Mohansaid moving to an RSP-basedsystem can provide a more stable source of revenue in caseof broken supply chains. “Inthe new taxation scheme, theentire cess is collected at thefirst point of sale, i.E., the manufacturer itself, limiting theimpact of tax evasion in the sector,” Mohan said. The estimated revenue fromRSP-based cess rate on panmasala and tobacco is almostat the same level as was in theearlier ad- valorem regime.