To make up for the immediate revenue loss, some state governments are asking for a significant share in the new taxation on the tobacco products
As part of the goods and services tax (GST) 2.0 reforms notified by Prime Minister Narendra Modi, the Centre is looking to levy additional excise or special duty above the proposed 40 per cent GST on tobacco products, as per media reports.
The reports highlighted that this is to maintain the overall taxation in the absence of compensation cess. The reports noted that to make up for the immediate revenue loss, some state governments are asking for a significant share in the new taxation on the tobacco products.
As part of the ongoing discussions on taxation on sin goods, states have asked for equal share on the additional duty on these goods, as per the reports, which added that the final discussion will be taken at the GST council meeting.
Led by Bihar’s chief minister Samrat Chaudhary, the group of ministers on rate rationalisation may meet one more time ahead of the next meeting. The reports emphasised that tobacco and tobacco products attract the 28 per cent GST rate plus other duties and cess, taking the total indirect tax to 53 per cent.
The reports highlighted that the finance ministry has proposed a two-tier GST structure, to do away with 12 per cent and 28 per cent tax slabs. The ministry has suggested a 40 per cent slab for five to seven sin goods including tobacco and tobacco products, the reports noted.
