----- New GST Mechanism for Pan Masala & Tobacco (Effective 1 Feb 2026)
⟢ What changes
- Compensation Cess ends from 1 Feb 2026
- New structure kicks in under:
i. Health & National Security Cess (Pan Masala)
ii. Additional Excise Duty + NCCD (Cigarettes & tobacco)
⟢ GST rates
- Pan masala, cigarettes, tobacco: 40% GST
- Earlier: 28% GST + Compensation Cess
👉 Overall tax incidence remains unchanged
⟢ Tax incidence
i. Pan masala: continues at ~88%
- Earlier: 28% GST + ~60% cess
- Now: 40% GST + ~48% cess
ii. Cigarettes & tobacco:
- No reduction in tax burden
- Still constitutionally subject to both GST & excise
⟢ Why States benefit
- Higher GST rate (40%) now flows through regular GST channel
- States get ~70% share (SGST + IGST settlement)
- Excise duty is part of divisible pool → directly increases State revenues
- Net effect: States receive more than earlier, not less