New GST rates applicable on tobacco, pan masala from February 1
If you use cigarettes, pan masala or tobacco related products, then this news is directly related to your pocket and budget. From tomorrow i.e. 1st February, a completely new and strict system of tax on these ‘harmful goods’ is going to be implemented in the country. It is believed that these changes made by the government will have a direct impact on the prices of these products. Although the revised GST rates technically came into effect in September last year, special provisions for products like cigarettes and tobacco will come into effect from tomorrow.
How much is the burden on the pocket going to increase?
According to the report of news agency PTI, from February 1, an additional ‘Excise Duty’ will be imposed on cigarettes and tobacco products and ‘Health Cess’ will be imposed on Pan Masala. The thing to note is that this new fee will be imposed separately on top of the highest rate of GST, i.e. 40 percent.
You will remember that from July 2017, 28 percent GST and compensation cess was levied on these goods. Now in the new system, the old cess will be replaced by new excise duty and health cess. This simply means that the government is making the tax structure more stringent on these harmful products, due to which it is natural for the prices to rise.
New mathematics of tax on MRP
The government has not only increased the tax rates, but has also made a major change in the method of tax collection. ‘Maximum Retail Price’ (MRP) based valuation will start from tomorrow for products like chewing tobacco, filter khaini, zarda based tobacco and gutkha. Now GST will be decided on the basis of the retail selling price printed on these packets. This will reduce the scope for tax evasion and the tax will reach the government only at the correct price of the products sold in the market.
Companies are now guarded by a ‘third eye’
Not only the pockets of the consumers but also the companies making these products have been tightened. Now the rules have become very strict for pan masala manufacturers. It will be mandatory for them to get a new registration under the ‘Health and National Security Cess Act’ from tomorrow.
Not only this, the government has taken the help of technology to stop tax evasion. Manufacturers will have to install CCTV cameras on all the packing machines in their factories. This will not be a trivial surveillance, but the footage of these cameras will have to be kept safe for at least 24 months i.e. two years. Besides, they will also have to tell the excise officials how many machines they have and their production capacity. Only if a machine remains closed for 15 days, they can ask for tax exemption.
Length of cigarette will decide its price
The math is a little different for cigarette smokers. According to the amendment made in the Central Excise Act, the tax on cigarettes will be decided according to its length. Now, depending on the length of the cigarette, excise duty ranging from Rs 2.05 to Rs 8.50 will be imposed per stick.