After uproar from lobbyists, Government increases cess on cigarettes

The GST council in a bid to increase the government revenue and prevent the manufacturers from reaping the annual “windfall” of approximately Rs.5000 crores has increased the cess on the cigarette.

India has increased of as much as 792 rupees ($12.31) for every 1,000 cigarettes, adding about 50 billion rupees ($777 million) in revenues for the government, finance minister Arun Jaitley said. “The peak GST rate of 28% as also the 5% ad valorem cess will continue but the fixed cess has been hiked in the range of Rs 485 and 792 per thousand sticks”, added the minister.

The new cess rate for non-filter and filter cigarettes of length not exceeding 65 mm would be 5% plus Rs 2,076 per thousand sticks. For non-filter cigarettes of 65 mm to 70 mm length, the rate would be 5% plus Rs 3,668 per thousand sticks as against 5% plus Rs 2,876 currently.

After GST was implemented, cigarettes initially became cheaper because the total tax burden had come down by about 6-7 percent. This caused an uproar from anti-tobacco activists which ultimately led to this move.

The higher rate will be effective from July 18 but is unlikely to increase the market price of cigarettes. 


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