The GST Council hiked cess on cigarettes to take away the gift prize manufacturers were reaping due to the crept in after the GST rate fixation, Finance Minister Arun Jaitley said.
While the peak Goods and Service Tax (GST) rate of 28 per cent stays and so does 5 per cent ad valorem cess on top of it, the fixed cess has been hiked between Rs. 485 and 792 per thousand sticks.
The increase in cess would bring in Rs. 5,000 crore of additional tax revenue which otherwise would have gone to the manufacturers.
The GST Council had in May fixed 28 per cent as the top rate for cigarettes. A 5 per cent ad valorem cess was levied on top of it and Rs. 1,591 per thousand sticks as fixed cess on both filter and non-filter cigarettes of not exceeding 65 mm length.
The cess rate varied from Rs. 2,126 to Rs. 4,170 for cigarettes of different lengths.
The manufacturers chose the latter. Jaitley said to correct this, the GST Council has raised the fixed cess by Rs. 485 to 792 per thousand sticks.
Consumer prices will, however, not change as the increased tax.
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