The Central Board of Indirect Taxes and Customs (CBIC) has issued two notifications regarding changes to the compensation cess on pan masala, specified tobacco and tobacco products. These changes will come into effect on April 1, 2023.
Implementation of the Provisions of Section 163 of the Finance Act, 2023
The Compensation Cess Notification 1/2023 implements the provisions of Section 163 of the Finance Act, 2023, with effect from april 1, 2023, which relate to the levy of compensation cess on tobacco products. The provisions of the notification amend the Schedule of the GST Compensation Cess Act and revise the maximum rate for levying the GST compensation cess on items such as pan masala and tobacco.
CBIC Compensation Cess Notification 1/2023 dated 31/03/2023: Implementation of the Provisions of Section 163 of the Finance Act, 2023 from April 1, 2023
Changes in Compensation Cess Rates on Tobacco and Pan Masala
The Compensation Cess Notification 2/2023 makes changes to the compensation cess rates on tobacco and pan masala, applicable with effect from april 1, 2023, replacing the current ad valorem rates with rates based on the Retail Sale Price (RSP). The compensation cess rate has been revised for pan masala and all unbranded/branded goods, excluding gutkha and homogenised or reconstituted tobacco with a brand name. The RSP has also been clarified in this notification.
CBIC Compensation Cess Notification 2/2023 dated 31/03/2023: Changes in Compensation Cess Rates on Tobacco and Pan Masala from April 1, 2023
Conclusion
The changes to the GST compensation cess on pan masala, specified tobacco and tobacco products are aimed at ensuring that the tax system remains fair and efficient. The notifications issued by the CBIC will come into effect on April 1, 2023, and will ensure that the compensation cess is levied based on the Retail Sale Price (RSP) of these products. This will help to ensure that the tax system remains transparent and easy to understand, while also providing the government with the resources it needs to continue to provide essential services to its citizens.
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CBIC notifies Ad-valorem Tax on Pan Masala, Tobaco where RSP not Required; SUVs clarified
CBIC has set a maximum rate of GST compensation cess on pan masala, cigarettes, and other forms of tobacco, with the highest rate linked to the retail sale price. The maximum GST compensation cess rate for pan masala will be 51% of the retail sale price per unit, up from 135% ad valorem currently. The tobacco cess rate has been set at Rs 4,170 per thousand stick plus 290 percent ad valorem or 100% of the retail sale price per unit. The highest rate so far has been Rs 4,170 per thousand stick plus 290 percent ad valorem. The cess is levied in addition to the highest GST rate of 28%. Is that the position now?