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At present, tobacco and pan masala attract a 28% Goods and Services Tax (GST), along with an additional compensation cess.
GST compensation cess on tobacco products, pan masala
The government will introduce two bills in the Lok Sabha that are expected to replace the GST compensation cess currently levied on tobacco products such as cigarettes.
At present, tobacco and pan masala attract a 28% Goods and Services Tax (GST), along with an additional compensation cess. However, the compensation cess regime is nearing its end.
The Central Excise Amendment Bill, 2025, and the Health Security-cum-National Security Cess Bill, 2025, are slated to be introduced on Monday by Finance Minister Nirmala Sitharaman.
According to reports, the Central Excise Amendment Bill, 2025, is likely to replace the existing GST compensation cess on tobacco products. “There will be no change in cess rates. The same cess currently levied under the GST framework will continue,” the reports added.
The compensation cess had earlier been extended by four years until March 31, 2026, to facilitate the repayment of loans taken to compensate states for revenue shortfalls during the COVID-19 period. Originally, the cess was planned for five years and was set to expire on June 30, 2022. It was introduced to offset revenue losses suffered by states following the rollout of GST.
Loan repayments are now expected to conclude by December, effectively bringing the compensation cess regime to an end.
At the GST Council meeting held on September 3, 2025, it was decided that the compensation cess on tobacco and pan masala would continue until the loans are fully repaid.
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More
December 01, 2025, 07:59 IST
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