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GST CESS

27th March, 2023

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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:

https://www.iasgyan.in/daily-current-affairs/gst-compensation-29#:~:text=GST%20Cess%20would%20apply%20to,collect%20and%20remit%20GST%20cess.

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%.

Read all about GST Council: https://iasgyan.in/daily-current-affairs/gst-council-35

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

Read: https://www.iasgyan.in/daily-current-affairs/gst-compensation-29#:~:text=GST%20Cess%20would%20apply%20to,collect%20and%20remit%20GST%20cess.

https://www.thehindu.com/business/Economy/govt-caps-maximum-gst-cess-rate-on-pan-masala-tobacco-links-rate-to-retail-sale-price/article66663802.ece