NEW DELHI: The first GST Council meeting after the rollout of the goods and services tax (GST) has decided to increase the cess on cigarettes in a bid to prevent manufacturers from reaping an annual windfall of Rs 5,000 crore, Finance Minister Arun Jaitley said on Monday. This is because the net effect of their prices was lower under the GST regime. Jaitley added that the increase in cess would not result in cigarette prices going up.
The meeting of the GST Council was held through video-conferencing. Briefing media after the meeting, Jaitley said it had previously fixed a peak GST rate of 28 per cent on cigarettes. On top of it, a cess was levied to create a corpus for compensating states for any loss of revenue from implementing the GST, which subsumed over a dozen central and state levies.
The cess was made up of 5 per cent ad valorem rate and a fixed per thousand stick rate based on length of cigarettes. The peak GST rate of 28 per cent as also the 5 per cent ad valorem cess will continue but the fixed cess has been hiked in the range of Rs 485 and 792 per thousand sticks, he said.