GST Council Raised the Cess on Cigarettes Understand its Effect on Companies


The Goods and Services Tax (GST) council decided to raise the cess rate on a cigarette. They are not under lower GST rates. The finance minister Arun Jaitley makes sure to Cigarette Companies that cigarette price will not change as a result of raised cess. The new tax system starts from 1 July in India. The government decides to charge 28% GST on Cigarettes. The cess was charged up to 5 percent that depends upon thousand stick rate based on length of cigarettes. The government charged high GST rate at 28% with 5% cess will hike in the range of 480 and 792 per thousand sticks.

Total Revenue Gain Estimate:

This is a new system to raised cess on a cigarette will provide more revenue to the government.  The GST rate with cess is lower than combined Central Excise and state VAT and other taxes together. The government decides these steps to looking in a long way. It is estimated idea that the total revenue gain is Rs 500o crore per annum. It resulted in windfall profit both for government and cigarette companies.

Price of Cigarettes Depends upon Companies Future Plan:

It provides a panic situation for cigarettes companies to decide either reduce the price of cigarettes according to heavy profit because it is harmful to health and not a desirable thing in public. This provides a win-win situation for a company to raise the cigarettes prices and earn huge profit option transfer this profit in the balance sheet. The governments also not want to provide low price cigarettes that are injurious to health. It may be a good idea for long vision in a healthy way.

Different Category of Cigarettes like Filter or Nonfilter Cigarettes:

The government decides to charge new tax according to filter or nonfilter cigarette length 65 to 70 mm length no chance 5% Plus Rs 2747 per thousand sticks as compared to present 5% shares plus RS 2126. For another type of cigarettes, the cess would be charged 36 present + 4170 per thousand sticks as compared to 5% + 4170 currently. It is a complex job for small merchants to understand various types of charges according to length and filter configurations.

More Tax Payer is Beneficial for Government:

This new tax format will increase the number of the tax payer in an easy way. It will migrate existing 70 lakh tax payer into GST and many new tax payers also add to the new tax system. It is estimated that 90 lakh tax payer under GST. This new tax system removes various types of tax with single GST tax. It provides maximum positive benefits to businesses in many ways.

It is very important to see the both side of the coin to get maximum profit in long run. It is equally beneficial to run their business smoothly that is profitable for both governments and tax payer. The governments should use proper resources to provide well education and information to the tax payer to pay their tax in a genuine way. It is biggest economic reform after India Independence. It is historical decide to raise cess on cigarettes to fix an anomaly in Goods and Services Tax.