GST Impact: Compensation Cess Increased on Cigarettes, Smoking to Become Costlier

Cornelia Mascio
Luglio 18, 2017

Correcting an anomaly in rate setting by the GST Council, the Centre on Monday increased cess rates on cigarettes which had become cheaper after implementation of the Goods and Services Tax from July 1.

"The GST Council has made a decision to hike cess on cigarettes to take the windfall manufacturers were making", Finance Minister Arun Jaitley said after a review meeting.

Rs 485-792 per thousand sticks. The changes in cigarette prices will come into effect starting midnight. So they probably would have resorted to the other option of transferring this windfall profits to their balance sheet.

"In respect of cigarettes, the Fitment Committee had recommended that in line with the weighted average Value-Added Tax rate (28.7%) the GST rate on cigarettes may be kept at 28%", the official statement said.

"GST presents a unique opportunity to government to address the growing illegal cigarette trade in the country", said TII Director Syed Mahmood Ahmad.

ITC shares fell almost 3 percent intraday Monday on fears of likely increase in cess on cigarettes. For non-filter cigarettes of 65-70 mm length, the rate would be 5 per cent plus Rs 3,668 per thousand sticks as against 5 per cent plus Rs 2,876 earlier.

Up to 65 mm length: Increase of Rs 0.485 per cigarette.

According to Morgan Stanley, which increased target price on the stock to Rs 395 from Rs 310, the key risk would be sharp increase in cigarette tax in the next Budget (likely February 2018). "This figure is nearly multiplying every day".

Asked if the tax rates on textiles would be reduced, Jaitley said the Council would consider all the suggestions. From this it comfortably looks like that the original number of applicants which included duplication... which was 80 lakh, I think we are nearly on the verge of crossing that figure.

The GST Council will meet next in the first week of August to review the progress of the new tax regime's implementation, Jaitley said.

Altre relazioniGrafFiotech

Discuti questo articolo

Segui i nostri GIORNALE