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A week after the GST Council raised the cess on cigarettes over the peak rate of 28 per cent, ITC increased cigarette prices by 4 to 8 per cent on as many as 25 different pack sizes and variants. Smokers will now have to shell out more for brands like Classic, Gold Flake, Navy Cut, Bristol, Flake, Scissors and Capstan.
The Economic Times today reported that premium brands like Classic and Gold Flake Kings have seen the sharpest hike in prices after the new rates are effective.
The GST council earlier this week imposed the cess on sin products over the fixed rate of 28 per cent as it felt that the tax on the cigarettes was lower under the new taxation regime than earlier. After the recent cess, the effective tax on cigarettes has gone up by 11-15 per cent. The maximum hike seen in the premium king size segment which is around 21 per cent.
According to the ET report, a 20-cigarette pack of Classic and Gold Flake Kings will now cost Rs 300, compared with their earlier maximum retail price of Rs 278. The price of a 10-stick Navy Cut Filter pack has gone up to Rs 94 from Rs 89, while the Flake Special Filter will now cost Rs 2 extra at Rs 50 for a 10-cigarette pack, the report said.
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The report also suggest that few smokers may end up paying more than the MRP as several retailers are charging a premium over the printed price, blaming a shortage of supply.
After announcing the new tax last week, Finance Minister Arun Jaitley said: "It was noted in the first 15 days of the GST implementation that when the rate on cigarettes was translated, the cascading effect of taxes was not factored in. We noted that cigarette companies were getting windfall profit from reduction in cigarette."
Before the new tax rates, cigarettes were taxed at the peak rate of 28 per cent, along with a cess of 5 per cent. However, the government felt that this is lower than what it was before the GST.
After the consideration, the cess on cigarettes of up to 65 mm was raised by Rs 485 per 1,000 sticks in the case of both filter and non-filter ones. The cess on longer than 65 mm and non-filter one was increased by Rs 792 per 1,000 sticks for non-filter ones and for the filtered ones, the cess was raised by Rs 621 per 1,000 sticks. In the case of cigars and king-sized cigarettes, the cess increased to 36 per cent from 5 per cent.
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