NEW DELHI: Seeking to ensure that prices of sin goods such as tobacco products and pan masala do not fall after withdrawal of GST compensation cess, finance minister Nirmala Sitharaman on Monday moved two bills that will empower govt to levy excise duty on tobacco and tobacco products, while imposing health and national security cess on pan masala.
While revenue from levy of excise on tobacco would be part of the divisible pool of tax revenues that will be shared with states, collection from health & national security cess would go towards funding public health initiatives and national security while maintaining high taxation on sin goods.
Central Excise (Amendment) Bill provides for a new central excise duty on tobacco products like cigarette, chewing tobacco, cigars, hookahs, zarda, and scented tobacco, replacing the existing compensation cess. It seeks to empower govt to levy excise duty on cigars and cigarettes in the range of Rs 5,000-11,000 per 1,000 sticks depending on the length. Also, it proposes a levy of 60-70% on unmanufactured tobacco and 100% on nicotine and inhalation products. This will be over and above the 40% GST rate on these goods. Currently, tobacco and pan masala attract 28% GST, plus a compensation cess.
Compensation cess is due to end by March, 2026 but the current collection trends indicate that the money which will be used to repay bonds, will be raised before deadline. The bills were introduced in LS and may be taken up for debate soon, govt officials said. TMC member Saugata Ray opposed introduction of the bills saying tobacco is harmful, but Central Excise (Amendment) Bill does not mention it.
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