Cigs cheaper under GST

Contrary to popular perception among smokers that cigarettes and other tobacco products would be dearer under the Goods and Services Tax (GST) regime, prices of these products have actually fallen by 7-9%.

The central government issued the notification regarding GST on cigarettes and other tobacco products on July 1, the day the new tax regime came into force. "The clarity on excise duty and other duties has come through after the issuance of the notification," said Deepak Mishra, anti-tobacco campaigner and executive director of Socio-Economic and Educational Development Society (SEEDS).

He added as per the new notification, basic excise duty (BED) and additional excise duty (AED) would not be levied on cigarettes. "Hence the effective taxes on cigarettes of various sizes have declined by 7-9% under the GST," Mishra said, adding the increasing demand for a higher tax on tobacco products in line with the World Health Organisation (WHO) prescriptions has been belied.

Mishra said the notification issued on July 1 has exempted cigarettes from BED and AED. Since there was no notification on national calamity contingent duty (NCCD), it has been assumed that it would continue in the GST regime.

"Cigarettes will be subject to 28% GST, ad valorem cess of 5%, specific cess and NCCD. This means that if retail prices are unchanged, tax per stick of cigarette will reduce by 7-9%," Mishra said.

"The GST regime has been benign towards the smokers of cigarette and 'bidi'. In the country, the cigarette smokers account for 11% of total tobacco consumers, and the remaining 89% belongs to the category of people who smoke 'bidi' and those who chew tobacco. The biggest share (80%) of revenue that the government gets is from the sale of cigarettes," Mishra added.

Mishra said effective low taxation on cigarette and other tobacco items under GST was in sync with the overall trend of decrease in tax on cigarettes for the last three fiscals, beginning with 13% in 2015-16, 10% in 2016-17 and 6% in 2017-18. Prior to this, the annual tax increase on cigarettes was 20%.

Source: Times of India