Mumbai, July 17: The Goods and Services Tax Council on Monday afternoon increased the compensation cess on cigarettes to ensure that the tax incidence does not fall under the new indirect tax regime. While the 28 per cent GST rate and 5 per cent ad valorem on tobacco product remain, the additional cess will change as per the length of the cigarettes, Union Finance Minister Arun Jaitley told reporters after the GST Council meeting through a video conferencing.

Earlier there were reports that the Union Government may hike cess on cigarettes if prices fell after GST implementation. Under the new indirect tax regime, cigarettes fall in the highest 28 per cent bracket and attract an additional cess depending on their length. After this, the effective levy will be about 8 per cent lower than earlier, brokerages CLSA and ICICI Direct was quoted by the Bloomberg Quint. This is mostly because the additional excise duty was dropped under the GST, they added. However, ITC, India’s one of the biggest cigarette manufacturer declined to comment on this. The changes in cigarette prices will come into effect starting midnight.

Arun Jaitley while addressing the press conference said that the government will get Rs 5,000 crore from the higher cess, which otherwise would have either translated to profits on the books of cigarette makers or a reduction in the retail prices. Also Read – GST Council hikes cess on cigarette to offset makers’ windfall

The Compensation Cess fixed are as follows:

On Non-Filtered Cigarettes

Up to 65 mm length: The price will increase by Rs 0.485 per cigarette.

Over 65 mm but less than 70 mm: The price will increase by Rs 0.792 per cigarette.

Filtered Cigarettes

Up to 65 mm length: Increase of Rs 0.485 per cigarette.

Length up to 65-70 mm: Increase of Rs 0.621 per cigarette.

Length up to 70-75 mm: Increase of Rs 0.792 per cigarette.