Parul
The government has put a cap on the maximum rate of GST compensation cess to be levied on tobacco products like cigarettes and pan masala, among other items.
The cap is among the 75 amendments made in the Finance Bill, which was passed in Lok Sabha on March 24. The compensation cess has been linked to the maximum rate of their retail sale price.
As per the Finance Bill, pan masala will attract the maximum GST compensation cess of 51 per cent of the retail sale price per unit.
Currently, pan masala is charged at 135 per cent ad valorem. Similarly, the rate for tobacco has been fixed at Rs 4,170 per thousand sticks plus 290 per cent ad valorem or 100 per cent of the retail sale price per unit. The cess is levied over and above the highest GST rate of 28 per cent.
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The suggestions of a Group of Ministers on stopping tax evasion in pan masala and gutkha enterprises were adopted by the GST Council, which is comprised of state finance ministers and is presided over by the Union Finance Minister, in February.
The GoM opposed a capacity-based levy and suggested compliance and tracking measures to be implemented to stop leakages and evasions; exports of such commodities to be permitted only under letter of undertaking with a corresponding refund of accumulated input tax credit; and compensation cess levied on such commodities to be changed from an ad valorem to a specific tax-based levy to increase the first stage collection of the GST revenues.
