Compensation cess on tobacco likely to be eliminated by Dec

The vestige of the compensation cess, which will continue on tobacco and tobacco-related items under the new Goods and Services Tax (GST) regime even after September 22, when most of the new rates are introduced, is expected to be eliminated by the end of the year after serving its purpose, a government official said.

- Rajeev Jayaswal

The 56th GST Council on Wednesday decided to remove compensation cess in a phased manner until the remaining liability of the back-to-back loans taken to fund state revenue losses during the pandemic period is discharged . This is expected by December this year, the official said asking not to be named.

While the levy of compensation cess will end on almost all sin goods and luxury items from September 22, it will continue along with 28% GST on pan masala, gutkha, cigarettes, chewing tobacco products like zarda, unmanufactured tobacco and bidi till loan repayment and interest payment obligations under the compensation cess account are completely discharged. These tobacco products, except bidi which will be taxed at 18% in the new regime, will then move into a special 40% rate.