Discovering the Influence of GST on the Lucrative Tobacco Industry in India: Delving into Tax Rates, Levies, and their Consequences
Despite the well-known health risks associated with smoking and tobacco consumption, the tobacco industry continues to thrive, with India standing as a global hotspot for mouth cancer cases, according to numerous reports from the World Health Organization (WHO). With a staggering 275 million tobacco users, India ranks as the second-largest consumer worldwide. In this informative blog post, we will delve into the intricate relationship between the Goods and Services Tax (GST) and this multi-million dollar industry. Explore the fascinating realm of GST on cigarettes, uncovering the applicable tax rates on various tobacco products, as well as the additional duties and cess imposed on them. Join us as we unravel the complexities surrounding the impact of GST on this significant sector.
Impact of GST on the Tobacco Industry
Navigating the Complex Tax Landscape: Unveiling the Multifaceted Taxation Imposed on India’s Tobacco Sector.
The tobacco industry in India bears the weight of multiple levies, including Central Excise duty, National Calamity Contingent Duty (NCCD), Goods and Services Tax (GST), and compensation cess, owing to its classification as a sin good. Notably, the sale of tobacco generates significant revenue for the Indian government. However, despite this, the tax burden imposed on the tobacco industry falls short of the World Health Organization’s (WHO) recommended minimum tax burden of 75% on all tobacco-related products.
Consequently, there is a growing demand for a higher tax burden on tobacco manufacturers. In response, the Indian government has consistently raised the tax rates on cigarettes and tobacco products. Reflecting this trajectory, the Budget 2023 proposed a 16% upward revision in the NCCD rate.
Now, let’s delve into the comprehensive list of duties and taxes imposed on cigarettes and other tobacco products. It’s important to note that this article provides an overview and may not cover all tobacco product categories.
Embark on this insightful journey as we unravel the complexities surrounding the taxation landscape in the Indian tobacco industry, shedding light on the various levies that shape its economic framework.
GST Rate on Cigarettes and Tobacco Products
Decoding Taxation Policies: Exploring GST Rates and Levies on Cigarettes and Tobacco Products in India.
In India, the government has implemented the highest Goods and Services Tax (GST) rate of 28% on cigarettes and tobacco products. This encompasses a range of items, including pan masala, cigars, cigarillos, hookah, and similar tobacco-based products. Furthermore, in compliance with the GST law, a compensation cess is imposed, and additional duties are levied under the Central Excise law.
Uncover the intricacies of taxation policies as we delve into the specifics of the 28% GST rate and the accompanying levies placed upon cigarettes and tobacco products. Gain a comprehensive understanding of the financial landscape that governs these goods, unraveling the impact of taxation on the industry.
Latest Excise Duty, NCCD, and Compensation Cess Rates on Cigarettes and Tobacco Products in India
Within the realm of sin goods, such as cigarettes and tobacco products, a compensation cess is imposed under the Goods and Services Tax (GST) law. Similarly, Central Excise laws mandate the levying of excise duty and National Calamity Contingent Duty (NCCD).
Refer to the table below for the most up-to-date rates of excise duty, NCCD, and compensation cess applicable to the manufacturing of cigarettes and tobacco products. Gain insights into the current taxation landscape, uncovering the intricate system that governs these products.
| Particulars | Cigarettes up to 65mm in length | Cigarettes between 65mm and 70mm | Filter cigarettes up to 65mm in length** | Filter cigarettes between 65mm and 70mm** | Filter cigarettes between 70mm and 75mm** | Other cigarettes containing tobacco | Cigarettes of tobacco substitutes |
| Excise duty | 5 | 5 | 5 | 5 | 5 | 10 | 5 |
| NCCD# | 230 | 290 | 510 | 510 | 630 | 850 | 690 |
| Compensation cess | 5% + Rs.2076 | 5% +Rs.3668* | 5% + Rs.2076 | 5% + Rs.2747 | 5% + Rs.3668 | 36% +Rs.4170 | Rs.4006 |
How to calculate GST on cigarettes?
| Particulars | Amount (in Rupees) |
| Cost of manufacturing a pack of 10 cigarettes(non-filter, up to 65mm in length) | 100 |
| Excise duty @0.5% on abated value (100 x 45%) x 0.5% | 0.23 |
| NCCD @230 per thousand cigarettes, i.e. 2.3% on abated value(100 x 45%) x 2.3% | 1.04 |
| Total price for GST calculation | 101.27 |
| GST @ 28% | 28.35 |
| Compensation cess @5% + 2076 per thousand cigarettes(102.53 x 5%)+20.76 | 25.82 |
| Total sale price | 155.44 |
Verdict
Contrary to expectations, the implementation of the Goods and Services Tax (GST) has resulted in only slight price increases for cigarettes and tobacco products in India, maintaining their affordability. Despite the recent proposal in Budget 2023 to raise the National Calamity Contingent Duty (NCCD) by approximately 16%, its effect on the selling price of cigarettes remains minimal, amounting to just a few rupees.
Uncover the reality of pricing dynamics as we analyse the impact of GST on the affordability of cigarettes and tobacco products. Gain insights into the subtle price differences that have emerged in the post-GST era, shedding light on the implications for consumers and the industry alike.
