The export of cigarettes under the GST regime involves specific tax treatments and refund eligibility considerations. As per Circular No. 24/2023-Customs, effective October 1, 2023, cigarettes and certain tobacco products must be exported under a Letter of Undertaking (LUT) without IGST payment, rendering the option to export with tax payment no longer available. Under LUT-based exports, refund eligibility includes unutilized Input Tax Credit (ITC), including Compensation Cess, governed by Rule 89(4) of the CGST Rules, 2017, and Circular No. 45/19/2018-GST. However, excise duty, levied under the Central Excise Act, 1944, and the National Calamity Contingent Duty (NCCD), imposed under Section 136 of the Finance Act, 2001, remain payable and non-refundable under GST provisions. Exported cigarettes attract varying tax rates, including 28% GST and a tiered Compensation Cess based on stick size and type. The excise duty and NCCD, being outside the GST framework, are excluded from refund mechanisms. This dual system reflects the complexity of indirect tax compliance for cigarette exporters.
Page Contents
1. Background
This opinion seeks to clarify the applicable indirect tax implications and refund eligibility in case of export of cigarettes under the GST regime, specifically under:
– Case 1: Export without payment of tax under Letter of Undertaking (LUT); and
– Case 2: Export with payment of tax, previously allowed under Section 16(3)(b) of the IGST Act, now restricted.
2. Legal Framework
1. GST & Export Related Provisions:
– Section 16(1) of the IGST Act, 2017: Defines zero-rated supply including exports.
– Section 16(3)(a) & (b) of the IGST Act, 2017: Allows exports under LUT or with IGST payment.
– Rule 89(4) of CGST Rules, 2017: Refund of ITC for LUT-based exports.
– Rule 96 of CGST Rules, 2017: Refund of IGST for exports with payment of tax.
2.Circular No. 24/2023-Customs:
Effective 1st October 2023, cigarettes and certain tobacco products must be exported under LUT without IGST payment.
3. Compensation Cess & Relevant Provisions
– Section 8 of Compensation Cess Act: Levy of cess.
– Section 9(2): GST provisions apply to cess.
– Section 11: Refund provisions of GST apply to cess.
– Circular No. 45/19/2018-GST: Compensation Cess refund is allowed for LUT-based exports.
4. Tax Rates on Cigarettes
(In rupees per one thousand sticks)
| Particulars | Cigarettes up to 65mm in length | Cigarettes between 65mm and 70mm | Filter cigarettes up to 65mm in length** | Filter cigarettes between 65mm and 70mm** | Filter cigarettes between 70mm and 75mm** | Other cigarettes containing tobacco | Cigarettes of tobacco substitutes |
| Excise duty | 5 | 5 | 5 | 5 | 5 | 10 | 5 |
| NCCD# | 230 | 290 | 510 | 510 | 630 | 850 | 690 |
| Compensation cess | 5% + Rs.2076 | 5% +
Rs.3668* |
5% + Rs.2076 | 5% + Rs.2747 | 5% + Rs.3668 | 36% +
Rs.4170 |
Rs.4006 |
*This rate is valid on cigarettes in length exceeding 65 millimetres but up to 75 millimetres.
5. Treatment of Central Excise & NCCD
– Excise Duty under Central Excise Act, 1944 continues.
– NCCD levied under Section 136 of Finance Act, 2001.
– These are outside GST and not refundable under GST framework.
6. Summary Table
| Component | Export under LUT | Export with IGST Payment |
| GST (28%) | Not Payable | ❌ Not allowed (w.e.f. Oct 2023) |
| Compensation Cess | Not Payable | ❌ Not allowed |
| Refund Eligibility | Refund of ITC incl. cess | ❌ Not permitted |
| Excise Duty | Payable; Not refundable | Payable; Not refundable |
| NCCD | Payable; Not refundable | Payable; Not refundable |
7. Final Opinion
Cigarettes must be exported under LUT without IGST payment as per Circular 24/2023.
Refund of unutilized ITC including Compensation Cess is allowed.
Excise and NCCD remain payable but not refundable under GST.
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