GST 2.0 Reform Sparks Debate

The government is reportedly considering imposing additional excise or special duties beyond the proposed 40% GST on tobacco products. This move aims to sustain current taxation levels following Prime Minister Narendra Modi's announcement of GST 2.0 reforms that eliminate compensation cess.

States Demand Significant Share

Several states are requesting a "significant share" in the supplementary taxation on tobacco items to offset immediate revenue reductions. "During the discussion some states asked for equal share on the additional duty to be imposed," disclosed one source anonymously.

Upcoming GST Council Meeting

The rate rationalisation ministerial group, led by Bihar's deputy chief minister Samrat Chaudhary, is likely to convene once more before the upcoming GST Council meeting to address this matter. The GST Council will take the ultimate decision on this issue.

Current Taxation on Tobacco Products

Presently, tobacco and related products face 28% GST plus compensation cess, central excise duty and national calamity contingent duty, totalling 53% indirect tax. The past five years saw average yearly GST collections of Rs 51,000 crore from tobacco products.

Proposed GST Restructuring

Finance officials proposed restructuring GST into two tiers, eliminating 12% and 28% slabs, while introducing a 40% category for select sin goods including tobacco products. The proposal maintains that overall tobacco product taxation would remain unchanged.

States' Revenue Concerns

Various states seek either equal shares in additional duties or independent taxation rights, similar to alcohol's state excise duty system. Kerala has formally requested compensation for revenue losses from GST reforms.