Parliament Passes Bill to Levy Higher Excise Duty on Tobacco Following GST Compensation Cess End
Parliament has approved the Central Excise (Amendment) Bill, 2025, which allows for the levy of excise duty on tobacco and related products. This move comes as the GST compensation cess is set to expire in December. Finance Minister Nirmala Sitharaman clarified that this is not an additional tax burden but a continuation of the existing tax structure under a different mechanism. Tobacco products will continue to be taxed at the 40% "demerit" category rate. The Bill ensures that the revenue stream from tobacco remains stable even after the transition away from the compensation cess regime.
Key Points
- The Central Excise (Amendment) Bill, 2025, was passed to maintain tax levels on tobacco after the GST compensation cess ends.
- Tobacco remains in the highest GST slab of 40%, classified as a 'demerit' good.
- The transition ensures that the total tax burden on the consumer remains unchanged while shifting the collection mechanism.
- The GST compensation cess was originally introduced to compensate states for revenue losses during the first five years of GST implementation.
Exam Facts
- The Bill passed is the Central Excise (Amendment) Bill, 2025.
- Tobacco is taxed at a 40% rate under the GST 'demerit' category.
- The GST compensation cess collection is expected to stop at the end of December.
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