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The central government is going to impose two new cesses on cigarettes and paan-gutkha. However, GST Compensation Cess was already levied on these, but now two cesses will be introduced in its place. On Monday, Finance Minister Nirmala Sitharaman can table these 2 bills in the Lok Sabha.
Tomorrow in the ongoing Parliament session in Delhi, the government is going to introduce a major tax change, which will be directly related to products like cigarettes, pan masala and gutkha. On behalf of the government, Finance Minister Nirmala Sitharaman will present two important bills in the Lok Sabha tomorrow. The first bill will be The Health Security se National Security Cess Bill 2025 and the second will be the Central Excise Act Amendment Bill, through which a new system will be implemented by replacing the existing GST Compensation Cess. According to Laxman Roy, Economic Policy Editor of CNBC Awaaz, there will be no change in the rates, that is, the same amount of cess that is levied now will be levied in future too.
The government is replacing the old cess on these products with GST so that tax collection can be made more straightforward and simple. At present, in addition to GST, Compensation Cess is levied on cigarettes, pan masala and gutkha, the period of which is ending. The government wants to carry forward the same structure under a new name and new law so that there is no gap in revenue.
Who will be affected to what extent?
There is not going to be any increase in rates due to this change. This means that at present there will be no direct impact on prices for the common man. But the change in tax system will bring changes in reporting and compliance for companies. The cigarette sector in particular already operates in a strict tax environment, so the new law could impose new compliance rules on them.
Why is the Central Excise Act being amended?
To impose cess on cigarettes, it will be removed from GST and brought under Central Excise Act. This is so that the government has more control over the tax monitoring of these products. Tracking is easier through excise structure and cases of tax evasion are also less.
What is the main objective of the government?
This step is being considered as part of the health based taxation strategy. By imposing higher taxes on pan masala, gutkha and tobacco based products, the government not only increases revenue but also tries to reduce their use. Keeping in mind both national security and health security, the government has given a comprehensive name to this new cess.
Can prices rise further?
Although the rates will not change now, but after coming under excise, it becomes easier for the government to increase the tax in future. Therefore, the possibility of further increase in prices cannot be ruled out. This decision will depend on the upcoming budget or health policies.
