GST Rates on Cigarette, Bidi, Chewing, Impact of GST on Tobacco Sector: Goods and Services Tax has been rolled out from July 1st, 2017. New tax structure will irrevocably impact the prices of all kinds of products. Being replacement of central and state taxes, its impact can be monitored after some time, post implementation. It is evident from past that excise duties have been kept changing, but locally manufactured bidi was exempted. On 18th May, 2017 GST council has declared GST tax rate on tobacco and tobacco-related products. Tobacco proceeds forms a major contributor of revenue for the Indian Government.
Must – GST Rates
GST Rates on Cigarette, Bidi, Chewing, Impact of GST on Tobacco Sector
India has the second largest number of tobacco users (275 million or 35 percent of all adults in India) in the world. A study estimated that nearly 10 percent of minors use tobacco primarily because tobacco industry targets children as their new consumer base.
As per WHO recommendations, existing tax burden on tobacco industry is not at par. Excise duty is charged on the manufacturing of cigarettes, bidi, and other chewing tobacco products at different rates.
- Cigarette – 64%
- Bidi – 22%
- Chewing products – 81%
Tobacco manufacturers are not allowed to opt for composition scheme under GST, where businesses are usually allowed to pay lower tax rate if turnover does not exceed specified limit.
It is anticipated that there might be increase in revenue to the government, but tobacco companies will keep their prices at current level, even if they increase price gradually consumption will not be reduced. Small traders are under threat of getting out of businesses as Centre has imposed 5% GST on tobacco leaves and 28% on unmanufactured tobacco.
As per GST product classification, tobacco-based products – cigarettes, gutka, pan masala and khaini have been put under “sinful goods” basket. Also tax imposed on such goods is @28% of the marked price, with 12% additional cess called “Sin Tax”. The GST Council decided to fix the cess rate on tobacco products at Rs 4,170 per 1,000 sticks or 290% ad valorem. It also capped the cess on pan masala at 135% ad valorem. This cess would be levied on above of the GST to be imposed on these products.
On Paan Masala, the cess will be levied at 60%, while in tobacco the levy will vary from 71% -204%. Branded Gutkha will be carrying a cess of 72% while smoking mixtures of pipes & cigarettes will attract a levy of 290%. Filter & Non-Filter cigarettes not exceeding 65mm will fetch cess of 5% plus Rs. 1,591/- per 1000 sticks. For Cigars, a hefty levy of 21% or Rs. 4,170/- per 1000 sticks, whichever is higher, would be levied. The cess will be over & above the high GST rates of the 28%.
GST Rate & HSN Code for Tobacco, Stemmed & Stripped
| HSN Code | Description | Rate (%) |
|---|---|---|
| 2401 | Tobacco leaves | 5 |
| 2401 | Unmanufactured tobacco; tobacco refuse [other than tobacco leaves] (other than bearing a brand name) | 28 |
| 2401 | Unmanufactured tobacco (without lime tube) – bearing a brand name | 28 |
| 2401 | Unmanufactured tobacco (with lime tube) – bearing a brand name | 28 |
| 2403 | Other manufactured tobacco and manufactured tobacco substitutes; “homogenised” or “reconstituted” tobacco; tobacco extracts and essences [including biris] (24031921 and 24031929) | 28 |
| 2402 | Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes | 28 |
| 24039990 | Pan masala containing tobacco ‘Gutkha’ | 28 |
| 24039990 | All goods, other than pan masala containing tobacco ‘gutkha’, bearing a brand name | 28 |
| 24039990 | All goods, other than pan masala containing tobacco ‘gutkha’, not bearing a brand name | 28 |
| 24039970 | Cut tobacco | 28 |
| 24039960 | Tobacco extracts and essence bearing a brand name | 28 |
| 24039960 | Tobacco extracts and essence not bearing a brand name | 28 |
| 24039950 | Preparations containing snuff | 28 |
| 24039940 | Snuff | 28 |
| 24039930 | Jarda scented tobacco | 28 |
| 24039920 | Preparations containing chewing tobacco | 28 |
| 24039910 | Chewing tobacco (without lime tube) | 28 |
| 24039910 | Chewing tobacco (with lime tube) | 28 |
| 24039910 | Filter khaini | 28 |
| 24039100 | “Homogenised” or “reconstituted” tobacco, bearing a brand name | 28 |
| 24039100 | “Homogenised” or “reconstituted” tobacco, other than bearing a brand name | 28 |
| 24031990 | Other smoking tobacco bearing a brand name | 28 |
| 24031990 | Other smoking tobacco not bearing a brand name | 28 |
| 24031910 | Smoking mixtures for pipes and cigarettes | 28 |
| 24031190 | Other water pipe smoking tobacco not bearing a brand name. | 28 |
| 24031110 | Hookah’ or ‘gudaku’ tobacco bearing a brand name | 28 |
| 24031110 | Tobacco used for smoking ‘hookah’ or ‘chilam’ commonly known as ‘hookah’ tobacco or ‘gudaku’ not bearing a brand name | 28 |
| 24029090 | Other | 28 |
| 24029020 | Cigarillos of tobacco substitutes | 28 |
| 24029010 | Cigarettes of tobacco substitutes | 28 |
| 24022090 | Other cigarettes containing tobacco | 28 |
| 24022050 | Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimetres or its actual length, whichever is more) exceeding 70 millimetres but not exceeding 75 millimetres | 28 |
| 24022040 | Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimetres or its actual length, whichever is more) exceeding 65 millimetres but not exceeding 70 millimetres | 28 |
| 24022030 | Filter cigarettes of length (including the length of the filter, the length of filter being 11 millimetres or its actual length, whichever is more) not exceeding 65 millimetres | 28 |
| 24022020 | Cigarettes containing tobacco other than filter cigarettes, of length exceeding 65 millimetres but not exceeding 75 millimetres | 28 |
| 24022010 | Cigarettes containing tobacco other than filter cigarettes, of length not exceeding 65 millimetres | 28 |
| 24021020 | Cigarillos | 28 |
| 24021010 | Cigar and cheroots | 28 |
| 24013000 | Tobacco refusebearing a brand name | 28 |
Written By: Amit Khiyani (CA, LCS, IFRS, BCom)
Contact: [email protected]
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