Due to COVID-19, there has been downturn in collection of taxes affecting domestic market with decline in consumption and a startled GDP. Compensation cess is to compensate the manufacturing states for loss in tax revenue. Compensation cess is imposed on items like pan masala, cigarettes and tobacco products, caffeinated beverages, motor vehicles etc. India has the second largest number of tobacco users (approximately 268 million or 28.6% of all adults in India) in the world. The GST Council had decided to limit the rate of cess on tobacco products at approximately Rs 4000 per 1000 sticks (around 290% ad-valorem) in June 2020. However, this decision was deferred due to lack of consensus. Public health experts have suggested the Government to levy uniform cess Rs.1 per stick of bidi and a COVID Cess on all cigarettes and smokeless tobacco.
