05.10.2023: GST Council rejects tobacco industry’s proposal to reconsider compensation cess, say sources

The fitment committee nominated by the Goods and Services Tax (GST) Council has put down the proposal to reconsider compensation cess on tobacco products, sources have told CNBC-TV18.

The tobacco industry had sought “uniform additional compensation cess on cigarettes, compensation cess on bidis, additional compensation cess on smokeless tobacco products, or lower compensation cess on cigarette sticks up to 70 mm,” highly placed sources said.
According to sources, the GST Council’s fitment committee, after discussing the request in detail, has rejected the proposal and suggested maintaining the status quo.
Currently, tobacco products like cigarettes, chewing tobacco, gutkha, etc. attract GST, compensation cess, basic excise duty and national calamity contingent duty (NCCD). Bidis, on the other hand, attract GST, basic excise duty and national calamity contingent duty (NCCD) but no compensation cess.
“Considering that there is no compensation cess on bidis, the tobacco industry has sought rationalisation of compensation cess on products such as 70mm cigarettes. However, the rates officers committee — the fitment committee, felt that the change is not required as bidi industry is a small scale industry and so it was kept free from cess,” sources said.
At present, compensation cess on tobacco products with printed MRPs is linked to the retail rate and ranges from 8% to 69%.
In the Union Budget 2023-24, the national calamity contingent duty (NCCD) rate on specified cigarettes was revised upwards by about 16% with effect from February 2, 2023.
The tobacco industry is of the view that taxes have reached a new peak with the recent changes, sources said.
Source: CNBC TV 18

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