Quick Summary
The Federation of All India Distributors Associations (FAIDA) has urged the government to revamp the way cigarettes are taxed under the GST. In a representation to the Finance Ministry, FAIDA has suggested shifting to a tax-at-source mechanism, where GST is levied upfront on the maximum retail price
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FAQ :
FAIDA is proposing a shift from the current multi-stage GST system to a tax-at-source mechanism, where GST is levied upfront on the Maximum Retail Price (MRP) of cigarettes.
FAIDA believes taxing cigarettes at MRP upfront would eliminate downstream evasion, ensure full revenue collection at the source, and reduce the compliance burden and unfair scrutiny faced by distributors.
The proposal is likely to be placed before the GST Council at its meeting scheduled for 3-4 September 2025.
Tax experts suggest an MRP-based model could boost government collections, streamline compliance, and bring greater clarity, potentially reducing disputes.
States might seek additional safeguards for their revenue streams, and careful consideration will be needed to balance government revenue, market stability, and consumer affordability.
Discussions may also cover pan masala, another product category prone to illicit trade and under-invoicing.
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