The Goods and Service Tax (GST)’s fitment committee has rejected the industry’s demand to lower the tax on EV batteries, tobacco products and proposed status quo ahead of October 7 Council meeting.
The industry had sought uniform additional compensation cess on cigarettes/compensation cess on bidis/additional compensation cess on smokeless tobacco products/or lower compensation cess on cigarette sticks up to 70 mm. They had also sought a lowering of GST on electric vehicle batteries from 18 percent to 5 percent.
In respect of tobacco and tobacco products, while deciding the Compensation Cess rates, it was decided that, in line with the weighted average VAT rate (28.7 percent), the GST rate on cigarettes may be kept at 28 percent,” sources said.
Furthermore, products such as cigarettes, chewing tobacco and gutka, among others, will attract GST, Compensation Cess, Basic Excise Duty, and National Calamity Contingent Duty (NCCD), while bidis attract GST, Basic Excise Duty and NCCD.
In the Union Budget 2023-24, the NCCD rate on specified cigarettes was revised upwards by about 16 percent with effect from February 2, 2023. This change is expected to lead to increased GST collections.
With respect to bidi, the Fitment Committee had proposed a GST rate of 28 percent, considering the fact that the total tax incidence on bidi was 25.68 percent. However, the committee had left open the issue of Compensation Cess on bidi. According to sources, the GST Council, after detailed deliberations, decided to charge 28 percent GST on bidis as proposed by the Fitment Committee but decided not to levy any Compensation Cess on it. It has remained unchanged since then.
On the basis of the recommendation (SHOULD IT BE “recommended”?) taxation, the GST Council said in its 49th and 50th meetings that the Compensation Cess rate levied on such commodities with a declared retail sale price has been linked to the retail sale price and is leviable at a rate ranging from 8 percent to 69 percent of the retail sale price,” the source said.
The GST fitment committee rejected industry requests to lower taxes on EV batteries and tobacco products, opting for status quo before the October 7 Council meeting. They sought reduced taxes on cigarette-related products and electric vehicle batteries, but tobacco products will maintain a 28 percent GST rate. Cigarettes attract multiple taxes, while bidis face a 28 percent GST rate without Compensation Cess. The NCCD rate on specified cigarettes increased by 16 percent in the 2023-24 Union Budget.
On Wednesday, ITC’s stock at NSE closed at Rs. 435.35, showing a 1% decline. Likewise, Godfrey Phillips closed at Rs. 2,100, down by 2.24%. VST Industries also saw a decline, closing at Rs. 3,393.15, down by 0.94%.
