New excise duty and cess on tobacco and pan masala from February 1
From February 1, the government will introduce a new tax structure for cigarettes, tobacco products, and pan masala. The move includes additional excise duty, a new cess, and MRP-based valuation to curb evasion and improve revenue
New Delhi: From February 1, the government is bringing a new tax structure for cigarettes, tobacco products and pan masala, aiming to tighten regulation and keep tax levels high on these so-called ‘sin goods’.
An additional excise duty will now be charged on cigarettes and tobacco products, along with a new health and national security cess on pan masala.
These new levies will replace the earlier system under which these products were taxed at 28 per cent GST along with a compensation cess that has been in place since the launch of GST in July 2017.
The government is also introducing a new MRP-based valuation system for several tobacco products such as chewing tobacco, filter khaini, jarda scented tobacco and gutkha.
Under this system, GST will be calculated based on the retail price printed on the packet, instead of factory value.
This move is expected to reduce tax evasion and improve revenue collection. Pan masala manufacturers will now have to take fresh registration under the new health and national security cess law starting February 1.
They will also be required to install CCTV cameras that cover all packing machines and store the video recordings for at least two years.
In addition, companies must inform excise authorities about the number of machines in their factories and their production capacity.
If any machine remains non-functional for 15 days in a row, manufacturers will be allowed to claim a reduction in excise duty for that period.
Even after the new changes, the government has ensured that the overall tax burden on pan masala, including 40 per cent GST, will remain around the current level of 88 per cent.
