Parliament approves Bill to levy excise duty on tobacco, Pg13

Key Highlights:

• Parliament approved the Central Excise (Amendment) Bill, 2025 to levy higher excise duty on tobacco products after the GST compensation cess ends.
• The Lok Sabha passed the Bill on Wednesday, and the Rajya Sabha returned it after approval on Thursday.
• The Finance Minister clarified that the tax burden on tobacco will remain at 40% under the GST framework, even without the compensation cess.
• The Bill's provisions will be effective once the current GST compensation cess on tobacco concludes.

Detailed Insights:

• The GST compensation cess, currently levied on tobacco, is expected to end in December, prompting the need for an alternative taxation mechanism.
• The approved Bill ensures that tobacco products continue to be taxed under the demerit category at 40% within the GST framework, maintaining the existing tax burden.
• The Central Excise (Amendment) Bill, 2025 aims to provide a structured approach for levying excise duty on tobacco and related products after the cessation of the GST compensation cess.
• The continuation of the 40% tax on tobacco reflects the government's stance on discouraging the consumption of demerit goods and generating revenue from these products.

Key Concepts Involved:

• Excise Duty: A tax levied on the production or sale of goods within a country.
• GST Compensation Cess: A levy imposed on certain goods under the GST regime to compensate states for revenue losses.
• Demerit Goods: Products considered harmful to society, such as tobacco and alcohol, often subject to higher taxes.