The States and civil society organisations have urged the select committee on the Goods and Services Tax (GST) Bill to give more powers for States to decide the tax on tobacco.
The Chairman of the Empowered Committee of State Finance Ministers, KM Mani, also told the panel that States should be given power to levy additional tax over and above GST on tobacco and tobacco products.
Mani told the panel on June 16 that the Centre has not agreed to the request of States on the ground that it has the power to tax the “demerit good (alcohol) and, therefore, the power to tax another demerit good (tobacco) should stay with the Centre.”
He said most of the States felt that they should be given the power to levy additional tax under Entry 54 of the State List of Seventh Schedule of the Constitution, over and above the GST on tobacco and its products, as the VAT levied on them are much higher at present.
The Voluntary Health Association of India, an NGO, said in its presentation that if tobacco is treated so differently in all respects, it requires differential treatment in GST too. Citing that India is home to second largest (275million) tobacco users, tobacco and tobacco products needs to be subjected to high duty.
Success of GST
The NGO said State autonomy is an important attribute for the success of GST and the Centre should allow such autonomy in goods with vast dispersion in tax rates such as tobacco.
It added that such a step will help in lowering the revenue neutral rate and can reduce the compensation by the Centre to States.