The government has fixed the GST cess on Pan Masala and tobacco product manufacturers based on the Retail Sales Price (RSP) with effect from April 1. In addition to the Goods and Services Tax (GST) levied at the rate of 28% earlier on pan masala and tobacco products, cess was levied in proportion to its value. But now this system has been changed.
According to the notification issued by the Ministry of Finance, 0.32 times the Retail Sales Price (RSP) of Pan Masala Pouch will be charged as GST Cess. The new rates have come into effect from the date of April 1, 2023.
How much will be GST Cess
The GST cess on pan masala containing tobacco gutkha will be 0.61 times the RSP, while the rate for cigarette and pipe tobacco items is 0.69 times. Chewing tobacco, khaini and zarda will attract a cess of 0.56 times the RSP, while the rate for hookah and branded raw tobacco is 0.36 times.
With the imposition of GST Cess on the basis of retail sales price, tobacco manufacturers will now have to pay cess on the final retail price of pan masala and tobacco products at the time of exit from the factory. This will help in preventing tax evasion as the cess will be collected at the factory level itself.
Tax evasion will be curbed
Rajat Mohan, senior partner, AMRG & Associates, said that by adopting an RSP-based cess system, the government can get a more sustainable source of revenue. He said that tax evasion in the pan masala industry can be reduced by collecting tax at the manufacturer’s level.
