Tobacco cess set to expire, enter health and national security cess

Finance minister Nirmala Sitharaman will introduce a bill in Lok Sabha on Monday to levy a new cess for public health and national security, replacing the GST compensation cess on tobacco, which will lapse when the Centre completes repayment of the loans raised to compensate states.

- Gireesh P Prasad

Levy to be on machines used to make the goods.

Monday will be the first day of the 15-sitting winter session of parliament.

As per the list of business in Lok Sabha, the proposed levy will be charged on machines or processes used to manufacture specified goods, but their details were not given. The new levy is likely to ensure that the overall tax burden on cigarettes, gutkha, pan masala and other tobacco products is maintained at the current level even after the expiry of the GST compensation cess.

The Centre's move follows the GST Council's decision in September to scrap the compensation cess on all goods except tobacco and shift to a largely two-rate structure, while leaving it to the finance minister to determine the exact timeline for tobacco’s transition to the proposed 40% GST slab for ultra luxury and ‘sin’ goods.