GST Cess

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Context

The Union government has capped the maximum rate of GST compensation cess that would be levied on pan masala, cigarettes and other forms of tobacco.
The capping of the cess rate was brought in as part of the amendments to the Finance Bill, 2023.

Read all about GST Compensation Cess:

Background

The GST Council in February 2023 approved the report of a panel of State Finance Ministers on plugging tax evasion in pan masala and gutkha businesses.
The GoM had recommended that the mechanism for levy of compensation cess on pan masala and chewing tobacco be changed from ad valorem to a specific rate-based levy to boost the first stage collection of the revenue.

Amendment Details

As per the amendment, the maximum GST compensation cess rate for pan masala will be 51% of the retail sale price per unit.
In the current regime, the cess is charged at 135% ad valorem [according to the estimated value of the goods being taxed].
The rate for tobacco has been fixed at ₹4,170 per thousand sticks plus 290% ad valorem or 100% of the retail sale price per unit. So far, the highest rate was ₹4,170 per thousand sticks plus 290% ad valorem.
The cess is levied over and above the highest Goods and Services Tax (GST) rate of 28%.

PRELIMS PRACTICE QUESTION

Q. Which of the following goods attract GST Cess?

a) Diesel-driven motor vehicles of engine capacity not exceeding 3000 cc.

b) Solid fuels manufactured from Peat.

c) The Aerated waters.

d) Cheroots and Cigars.

1) a and c

2) c and d

3) b and c

4) a, b and c

Answer: 2