Ministry of Finance addressed questions on potential tax hikes for tobacco products based on recommendations by the Parliamentary Committee on Health & Family Welfare. It stated that tobacco products are taxed under GST, Compensation Cess, and Central Excise Duty. The GST rates and Compensation Cess are determined by the GST Council, a constitutional body with representation from states, UTs, and the Centre. In its 49th meeting, the GST Council shifted the Compensation Cess for certain tobacco products to a specific tax-based levy linked to retail sale price, ensuring tax collection at the manufacturing stage. Currently, there is no proposal from the GST Council to increase GST or Compensation Cess rates on tobacco products.
Regarding excise duty, the 2023-24 Union Budget increased the National Calamity Contingent Duty (NCCD) on specified cigarettes by approximately 16%.
The government clarified that revenues from tobacco taxes contribute to the overall Gross Tax Revenues (GTR) and are not earmarked for specific purposes like cancer prevention but are used to fund various government schemes and programs.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
RAJYA SABHA
UNSTARRED QUESTION NO-2469
ANSWERED ON – 17.12.2024
INCREASE OF TAXES ON TOBACCO PRODUCTS
2469. SHRI BHUBANESWAR KALITA:
Will the Minister of FINANCE be pleased to state:-
(a) whether Government is planning to consider the recommendations of Parliamentary Committee on Health & Family Welfare to increase taxes on tobacco products;
(b) if so, the action taken by Government to increase the taxes; and
(c) whether the additional revenue on the taxes will be utilized for cancer prevention?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) and (b): Tobacco products are subject to GST, Compensation Cess and Central Excise duty. GST rates are prescribed on the recommendations of the GST Council which is a constitutional body comprising representatives from States/UTs and Centre. The Compensation Cess levied on certain tobacco products, such as chewing tobacco, gutkha etc, was changed from ad valorem tax to specific tax-based levy, linked to retail sale price where required to be declared, to ensure collection of the tax at the first stage (manufacturer level) based on the recommendations of the 49th GST Council. At present there is no recommendation of the GST Council to increase the GST or Compensation Cess rate on tobacco products.
As regards Central Excise duty, in the Union Budget 2023-24, the rate of National Calamity
Contingent Duty (NCCD) levied as a duty of excise was increased on specified cigarettes by about 16%.
(c): Taxes collected from tobacco, similar to taxes collected from other sources, together form part of the overall Gross Tax Revenues (GTR) of the Government of India and are used to fund all schemes and programmes of the Government.
