New Bill May Tax Tobacco More
The Indian government is considering a new bill to introduce a different tax on tobacco products, which would replace the current GST compensation cess. This legislation could be introduced during the upcoming winter session of Parliament.
Currently, tobacco products face a 28% GST rate along with a compensation cess. This cess was meant to compensate states for revenue losses under the GST regime and was supposed to end soon. However, it will now continue for a few more months to allow the government to fully repay loans.
Once these loans are settled and the cess is removed, the GST rate on tobacco products is expected to jump to 40%, the highest possible bracket. The new levy would then be imposed on top of this higher GST rate, ensuring the total tax on tobacco remains at its current high of about 53%. This move is aimed at maintaining the existing tax burden on “sin products” while transitioning away from the temporary compensation cess.