GST Council caps limit of cess rate on cigarette - Tradebizz Research

ITC – GST Council has capped the limit of the cess rate on cigarette at Rs 4,170 per 1,000 sticks or 290 percent ad valorem [current rate of tax (excise + VAT) is about 47% or Rs 2500 per stick] – sentimentally negative  for ITC and other cigarette manufacturers; more clarity will emerge once the rate is finalize

The GST Council has capped the limit of the cess rate on cigarette and tobacco products at Rs 4,170 per 1,000 sticks or 290 percent ad valorem. This rate will be over and above the GST rate of 28% [current rate of tax (excise + VAT) is about 47% or Rs 2500 per stick].

The government is yet to finalize the cess rate on cigarette and more clarity will emerge once the GST and cess rate is finalize in the coming months.

The initial comments from government authorities indicate that no significant increase in the rate in comparison to current tax rate.

View: Overall we expect the cigarette prices will move up in the coming years (though not immediately). However more clarity will emerge once the rate is finalize. We believe it will be sentimentally negative for the stock.

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