GST Rates for Manufactured Tobacco Substitutes: HSN Code 2403 Explained

Tobacco and tobacco products are assessed to generate around 18,000 crores of revenue for the management and nearly 5,000 crores in foreign exchange, according to official reports. Though the prominence of the tobacco industry has gradually declined over the years, it continues to be a major revenue earner for the Government through taxes. In this article, we look at the tobacco and cigarette GST rates sideways with the cess rate and HSN code.

GST Rate for Tobacco

The Tobacco GST rate for all types of foodstuffs is 28%, except for tobacco leaves. The GST rate for tobacco leaves is 5% under the contrary charge. As GST for tobacco leaves is valid under reverse charge, the recipient of the goods is required to pay the GST applicable directly to the Government. For example, if a tobacco engineering unit purchases tobacco leaves from a farmer, the tobacco manufacturing unit would be required to pay GST at the rate of 5% directly to the Government.

GST Cess for Tobacco Products

Tobacco foodstuffs are one of the items that attract the most GST Cess. The GST cess rate for tobacco products ranges from 11% to 290%. Hence, it's important for all persons supplying tobacco and tobacco foodstuffs to be well aware of GST Cess on tobacco calculation, its rules, and guidelines.

GST Cess on Tobacco Calculation

The GST cess on tobacco products is calculated precisely to address the health impacts of tobacco use and provide added revenue for public health programs. The cess rates vary significantly depending on the type of tobacco product. For case, unmanufactured tobacco products without lime tubes attract a cess rate of 71%, while more processed products like pan masala containing tobacco, known by means of 'Gutkha,' face a higher cess rate of 204%. The GST Cess on tobacco calculation involves adding this added cess amount to the regular GST, making the final tax weight heavier on these harmful products.

Tobacco GST Rate and Cess for PAN, Gutkha, PAN, Chewing Tobacco besides Tobacco Products

In the table below, we have agreed on the list of items and their respective tobacco GST rates besides Cess,

GST on Cigarettes

GST on Cigarettes, Rates, and Cess

Below, we have given info regarding GST on cigarettes, along with rates besides Cess,

HSN	HSN Description	Units	CGST	SGST/UTGST	IGST
2403	Other Manufactured Tobacco And Manufactured Tobacco Substitutes; Homogenised Or Reconstituted Tobacco; Tobacco Extracts And Essences - Smoking Tobacco, Wether Or Not Containing Tobacco Substitute In Any Proportion;
240310	Smoking Tobacco, Whether Or Not Containing Tobacco Substitutes In Any Proportion	N.a	14.00%	14.00%	28.00%
240311	Water Pipe Tobacco Specified In Sub-Heading Note To This Chapter	N.a	14.00%	14.00%	28%
24031110	Other Manufactured Tobacco And Manufactured Tobacco Substitutes;"Homogenised" Or "Reconstituted" Tobacco;Tobacco Extracts And Essences-Smoking Tobacco, Whether Or Nto Containing Tobacco Substitutes	N.a	14.00%	14.00%	28%
24031190	Other Manufactured Tobacco And Manufactured Tobacco Substitutes;"Homogenised" Or "Reconstituted" Tobacco;Tobacco Extracts And Essences-Smoking Tobacco, Whether Or Nto Containing Tobacco Substitutes	kg.	0.14	0.14	0.28

The GST on cigarettes is put on to all types, including filter and non-filter cigarettes. The cigarette GST rate is intended to depress smoking due to its health hazards and to generate significant revenue for the Government. Furthermore, a cess in a certain range is imposed on cigarettes, depending on the length and type, swelling the overall tax burden on this tobacco product.

HSN Code in GST

The HSN code refers to the product description and its characteristics. HSN Code in GST is necessary to discriminate the products from one another. Receipt of the GST for HSN helps to get the idea of whether the product is different and unique in character from other products. Under this code, the HSN code removes the need for a thorough description of products. If a dealer or service provider's revenue falls above the slabs or limit of Rs. 5 crore, he or she must include an HSN/SAC-specific garage sale summary in his GSTR-1.

HSN Code in Export

When the transferring under Certificate of Origin (COO), APEDA Certificate, SAFTA Certificate, and AD Code Registration takes place, there is an adverse list for some HSN codes on which the exemptions or the benefit can't be provided. The HSN code for exporting code falls under the subheading of the undesirable list, which exempts certain goods that fall underneath the negative list.

Disclaimer

To the best of our data, the rates listed above, which are provided, have been reread from the announcement no. 05/2020, dated October 16, 2020. We got the HSN code information from the master codes provided on the NIC's GST e-invoice system. Variations may occur as a result of government upgrades. Please be aware that we cannot be held accountable for any incorrect information. If you need information about the "effective date" for each GST or cess rate, please go to the CBIC website.

Who Requires HSN Code?

The requirement of the HSN code in Smoking Tobacco is compulsory for those who pay taxes on the turnover of their business, which tops Rs. 1.5 crore. When the business turnover tops Rs 5 crore, then the HSN code has an 8-digit code and resembles the product description. At the same time, the HSN code is limited to 4 digits if the income is up to Rs. 5 crore.

Suggested Read: Laboratory Equipment GST Rates and HSN Code 8419 Explained

Conclusion

The HSN code 2403 in Smoking Tobacco pays the taxes on the business of their business. This code is mandatory for businesses that beat the turnover limit of a certain business of Rs. 5 crore. This HSN code helps to discriminate and specify the characteristics of products that are used for trading. If you get the Smoking Tobacco HSN code 2403, your business goods get comprehensive identification and recognition from a diverse choice of items trading.

FAQs

Is there any difference between the HS and HSN codes?

The HS (Harmonized System Code) code, besides the HSN code, is the same code that is used for the shipment of goods. However, the HS code is known as the HSN code in India. Like the HS code, the HSN code also encompasses 6-digit codes.

Why do HSN codes vary in length?

The HSN code length may vary, depending on the business turnover. When the business turnover exceeds Rs 5 crore, then the HSN code has an 8-digit code and resembles the product description. At the same time, the HSN code is imperfect to 4 digits if the turnover is up to Rs. 5 crore.

Is GST applicable on Hookah?

Generally, such restaurants, popularly called by way of “hookah bars,” provide predominantly Hookah services besides auxiliary food items in exclusive smoking zones. Secondly, such cafeterias opt for payment of GST @ 5% for the supply of food/drinks and hookah.

Which taxes are levied on tobacco?

The tobacco industry appeals to Central Excise duty, National Calamity Contingent Duty (NCCD), GST, and compensation cess as it is a sin good. In fact, a lot of proceeds are generated from the sale of tobacco for the Indian government.