NEW DELHI: Finance minister Nirmala Sitharaman on Wednesday said the govt had not proposed to levy a new cess but was levying excise on tobacco products.“This is not a new law, this is not an additional tax or something that the Centre is taking away. Many MPs here observed that this is a cess. This is not a cess, this is excise duty. Excise duty existed before GST. The amount will be redistributed to the states as per the Finance Commission’s recommendations,” she told Lok Sabha while responding to the discussion on the Central Excise (Amendment) Bill. The bill was passed by the lower House by voice vote.“In order to ensure that the incidence is not lower than what it was during GST with the compensation cess, we are bringing this excise. In a way, we are saying cigarettes should not become affordable now because incidence has become less,” the minister said while moving the bill.The minister also said that the Centre always keeps the interests of states in mind and no state gets less resources than what has been mandated by the Finance Commission.Dismissing charges of the Centre using GST compensation cess money to repay its debt, Sitharaman said, “It has been clarified many times that the compensation cess was collected for a period of five years for the purpose of giving it to the states, and that after five years it was to conclude…The compensation cess was, in fact, collected with the authority of the GST Council to repay the loan taken for the back-to-back arrangements made to compensate state governments for the revenues they could not collect during the Covid-19 pandemic.”By amending the Central Excise Act, the Centre has sought powers to levy excise duty of Rs 2,700 to Rs 11,000 per 1,000 sticks of various categories of cigarettes. The bill also proposes a levy of 60%-70% on every kg of tobacco used for various purposes and 100% a kg on chewing tobacco.She said that before GST, tax rates on tobacco were increased every year, so that high prices acted as a deterrent to consumption.Quoting the World Health Organization (WHO) observation that cigarette affordability has either stagnated or increased in the past decade in India, Sitharaman said the cess rates on cigarettes have remained unchanged since 2017, when GST was implemented.
