In the wake of reduction in the burden on the Cigarette companies post GST, the finance minister Arun Jaitley has decided after a GST Council meeting on Monday that the ad valorem tax on cigarettes would be increased!
In first 15 days of GST implementation, it was noted that the 28 percent tax rate plus compensation cess on cigarettes when translated, the impact of cascading effect had not adequately factored in, resulting in windfall gain for the cigarette companies. – Arun Jaitley said.
Even though the GST remains at 28 per cent on cigarettes, the ad valorem at 5 percent with the numerical amount on each category of filtered and non-filtered cigarettes being raised to Rs 2,076 per 1,000 units, Rs 2,747 per 1,000 and Rs 3,668 per 1,000 of different categories of cigarettes. For other cigarettes the ad valorem has been increased to 36 percent plus Rs 4,170 per 1,000 units. The increase in cess would bring in Rs 5,000 crore of additional tax revenue which otherwise would have gone to the manufacturers!