The Group of Ministers (GoM) on GST rate rationalization has recommended increasing the GST rate on tobacco products to 35%. Currently, tobacco products are taxed at 28%, along with a compensation cess ranging from 11% to 290%, depending on the product type. This makes tobacco among the most heavily taxed items under the GST regime.
Tobacco leaves are an exception, taxed at 5% under the reverse charge mechanism, where the buyer, rather than the seller, remits GST to the government.
The GoM’s proposal will be deliberated at the GST Council meeting scheduled for December 21 in Jaisalmer. If implemented, the higher GST rate would further raise the cost of tobacco products, aligning with the government’s broader objective of discouraging tobacco consumption through taxation.
This proposal comes as part of the GoM’s larger effort to rationalize GST rates, ensuring that luxury and high-risk items like tobacco attract higher levies while reducing taxes on essential goods. The move is expected to impact manufacturers, suppliers, and consumers of tobacco products significantly.
