If you are fond of cigarette, hookah or any kind of tobacco products, then there is a bad news for you. The central government is planning to increase tax on tobacco products. It is proposed to impose 40% GST on tobacco under Prime Minister Modi’s GST 2.0 reforms and some more taxes can also be imposed. The main objective of the government is to not let any decrease in earnings from tobacco and control its effect on health.
At the same time, states have also demanded to increase their share in this change. Many state governments say that the additional tax imposed on tobacco should also be increased. They believe that they should get more share to compensate for the loss caused by GST.
How much is tax now?
Currently, 28% GST is imposed on tobacco and associated products like cigarette, cigars, paan masala and hookah. Apart from this, additional taxes such as compensation cess, central excise and national disaster duty are also levied on them. All these products come in the category (items of luxury), that is, there is more tax on them. If according to the government’s proposal, 40% GST is imposed on tobacco products, then a packet of cigarettes, which is currently worth Rs 256, will be about Rs 280.
Finance officials had recently proposed to divide GST into two slabs. This means that the slabs of 12% and 28% will be abolished and a tax rate of 40% will be applied to “Sin Goods” like tobacco. However, the government says that the total tax will remain the same, just additional fee will be imposed by abolishing compensation cess.
States ask for more stake
According to the Economics Times report, the state governments are emphasizing that they should also get their share in the additional tax imposed on tobacco products, so that there is no shortage in their revenue. Some states have even suggested that tax be divided as central excise and state excise duty, such as alcohol. This will benefit both, ie Center and State,.
Tobacco products get cheap in India
The prices of tobacco products in India are considered cheaper than many countries around the world. According to a report, the prices of tobacco products in India are quite low globally, due to which their consumption is increasing. A committee of Parliament also said in its report that increasing tax on tobacco can not only improve public health, but it can also be a good opportunity for the government to increase revenue. Let me tell you in the last financial year 2022-23, the government earned about Rs 72,788 crore from the sale of tobacco products.