Gutka and Pan masala products to face tax overhaul, new cess to keep 'sin goods' price high

NEW DELHI: The Lok Sabha has passed the Health and National Security Bill to maintain the existing tax burden on tobacco, pan masala and similar "sin goods" after discontinuation of the GST compensation cess. The price of pan masala products will not change. The cess is based on the speed of the machine that makes pan masala packets, the capacity of other processes, and the weight of the pouch, tin, or other container. The government can increase the cess amount in special circumstances. The cess revenue can be credited to the Consolidated Fund and used for expenses related to national security and public health of India. Therefore, the states will not get their share of cess. Meanwhile, the Lok Sabha has passed the GST Amendment Bill to impose excise duty on tobacco products in addition to the 40% GST (Sin Goods GST).

👉Currently 28% GST + Compensation Cess

👉Change: New 'Sin Goods' GST 40% + Health, National Health Cess.

Penalty for failure

• 15% interest and a fine of Rs. 10,000 or an amount equivalent to the cess will be imposed if cess is not paid on time.
• Fine of up to Rs. 1 lakh will be imposed on those who help in the violation of the law.
• Imprisonment for up to 5 years or a fine or both if the cess arrears exceed Rs. 5 crore; imprisonment for up to 3 years or a fine if between Rs. 2 crore and Rs. 5 crore, and imprisonment for one year or a fine if between Rs. 1 crore and Rs. 2 crore.
• If convicted again, imprisonment for up to 5 years.

Excise Duty

• Raw tobacco products: 70% per kg, tobacco waste 60%, nicotine products 100%.
• Cigarettes, cheroots: 25% or Rs. 5,000 to Rs. 11,000 per thousand

Compensatory Cess

Introduced in 2017 to compensate for the revenue loss to the states when GST was introduced. Although it expired in June 2022, its validity has been extended till the current financial year.