LI Network
Published on: 09 July 2023 at 12:49 IST
The government’s plan to impose taxes on the retail sale prices of certain commodities, such as pan masala and tobacco products, appears to have encountered obstacles. However, a phased implementation of a stricter regime to address revenue leakage in these commodities is being considered.
Under the proposed system, manufacturers would be required to pay the cess based on the final retail price of these products when they leave the factory.
The fitment committee, comprised of revenue officials from both the states and the central government, has received representations highlighting challenges in determining the rate of compensation cess, particularly for goods where declaring the retail sale price is not legally required. The committee, responsible for determining tax rates on goods and services, may recommend notifying earlier rates as applicable on March 31 by amending previous notifications. It remains unclear whether these issues apply to all goods in the category or only some of them.
The retail sale price-based GST cess rate for this sector came into effect on April 1. The intention was to move away from the previous system, which imposed a cess in addition to the 28 percent GST rate on an ad valorem basis. Previously, the cess rate on tobacco products was 290 percent, while for pan masala, it was 135 percent.
Meanwhile, the law committee, examining stricter enforcement measures to combat leakage in these sectors, may propose their implementation in phases. A group of ministers (GoM) led by Odisha Finance Minister Niranjan Pujari had suggested a more stringent mechanism, which was approved by the council in its last meeting on February 18.
The law panel suggests that the GST Network (GSTN) should examine the technical requirements for implementing the proposed measures. It also highlights the need for reviewing additional compliance requirements after one year. Other proposed measures, such as stamping, mandatory e-invoicing regardless of turnover, mandatory e-way bills regardless of invoice value, vehicle tracking, and priority alerts in e-way bills, may be considered in subsequent phases.
Regarding specific measures like registration of machines used in these products and filing a special monthly return, the law panel recommends implementing them through a system-based portal.
