The central government has set a maximum rate of GST compensating cess on pan masala, cigarettes, and other kinds of tobacco, with the highest rate tied to the retail sale price. It was included in revisions to the Finance Bill 2023, which was approved by the Lok Sabha on Friday. The maximum GST compensating cess rate for pan masala would be 51% of the retail sale price per unit, an increase from the present cess charge of 135% ad valorem. Tobacco is priced at Rs 4,170 per thousand sticks + 290% ad valorem or 100% of the retail sale price per unit.
Amendments to Schedule I of the GST Compensation Cess Act, implemented through a Finance Bill amendment, have capped the maximum cess that can be charged on Pan masala and tobacco products. However, tax experts believe that the GST council will need to issue a notification to determine the exact compensation cess due as a result of this move.
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