NEW DELHI, Jan 31:
An additional excise duty on cigarettes and tobacco products, and a health cess on pan masala, over and above the highest 40 per cent GST rate, will come into effect from February 1.
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The cess and excise levies will replace the existing 28 per cent Goods and Services Tax (GST), plus compensation cess, on such ‘sin goods’ which was there on these items since GST was rolled out on July 1, 2017.
Also, from February 1, a new MRP-based valuation mechanism will be introduced for tobacco products (chewing tobacco, filter khaini, jarda scented tobacco, gutkha) whereby GST shall be determined based on retail sale price declared on the package.
Pan masala manufacturers need to apply for a new registration under the health and national security cess law from February 1. Manufacturers of such products will have to install a functional CCTV system covering all packing machines and preserve the footage for at least 24 months.
They will also have to disclose with excise authorities the number of machines and their capacities and can also claim abatement in excise duty in case a machine is non-functional for a minimum of 15 consecutive days.
Effective February 1, the Central Excise Act has been amended to impose excise duty ranging from Rs 2.05-8.50 per stick based on cigarette length.
Besides, the health and national security cess Act levies cess on manufacturing capacity of pan masala units. The total tax incidence on pan masala after taking into account 40 per cent GST will be retained at the current level of 88 per cent.
Under the new tax structure, short non-filter cigarettes (up to 65 mm) will attract an additional duty of about Rs 2.05 per stick, while short filter cigarettes of the same length will be charged around Rs 2.10 per stick.
Medium-length cigarettes (65-70 mm) will face an additional duty of roughly Rs 3.6-4 per stick, and long, premium cigarettes (70-75 mm) about Rs 5.4 per stick.
The highest duty of Rs 8.50 per stick applies only to unusual or non-standard designs of cigarettes and most popular cigarette brands do not fall under this slab.
Crisil Ratings in a report has said that the domestic cigarette industry will see a 6-8 per cent volume contraction in the next fiscal, following the imposition of additional excise duties.
Chewing and jarda scented tobacco, and gutkha will attract an excise duty of 82 per cent, and 91 per cent, respectively.
The proceeds from excise duty on tobacco products will be redistributed among States as per Finance Commission recommendations. The Centre’s tax revenues form part of the divisible pool and 41 per cent of it is shared among the States. (PTI)
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