FM: Tobacco excise duty will be shared with states, Pg10

Key Highlights:

• The Lok Sabha passed the Central Excise (Amendment) Bill to levy excise duty on tobacco and related products.
• The collected revenue will be part of the divisible pool, with 41% shared with the states.
• The Bill aims to maintain the tax incidence on demerit goods like tobacco.
• The Finance Minister clarified that this is not a new tax or cess, but a reversion to pre-GST excise duty.

Detailed Insights:

• The excise duty ensures that the total tax on tobacco remains consistent even after the GST compensation cess expires.
• Without the excise duty, the overall tax on tobacco would decrease due to the 40% cap on GST rates.
• Opposition MPs criticized the Bill, alleging it addresses fiscal issues caused by GST implementation.
• Concerns were raised about the impact on bidi-rollers, leaf-pluckers, and small supari growers.
• Some MPs suggested a focus on reducing tobacco use and supporting alternative livelihoods for affected workers.
• The debate included discussions on whether fiscal measures alone can effectively curb tobacco consumption.

Key Concepts Involved:

• Excise Duty: A tax levied on the production or sale of specific goods within a country.
• Divisible Pool: The total tax revenue collected by the Union government that is shared with the states.
• GST Compensation Cess: A levy imposed on certain goods to compensate states for revenue losses due to GST implementation.
• Demerit Goods: Products considered harmful to society, often subject to higher taxes (e.g., tobacco, alcohol).