Concurrent levy of C.Ex., and GST on Tobacco is Constitutionally valid

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In a very important decision, the Honourable Karnataka High Court has upheld the *constitutional validity* of the imposition of central excise duty, national calamity contingent duty (NCCD) *simultaneously* with the goods and services tax (GST) on tobacco and tobacco products.

The court ruled that *the taxable event* for levy of excise duty would be *manufacturing* of tobacco and the tobacco products and for levy of GST, the taxable event would be *supply* of tobacco and tobacco products.

The issue involved is that, *V.S. Products*, a proprietary firm engaged in the manufacturing of tobacco and tobacco products, *challenged the continuation of excise duty and NCCD even after introduction of GST* from 01st July 2017. 

Currently, *excise duty at 0.5 per cent* and *NCCD at 25%* are imposed on tobacco. However, an abatement of 55 per cent is given which means the *effective rate of taxation* is 11.475 per cent. 

GST is levied on supply of tobacco products at *28% and on tobacco leaves at 5%* apart from Compensation Cess levied at different rates.

The company argued that the levy of excise duty on tobacco and tobacco products along with GST amounts to *hostile discrimination and is violative of Article 14 which guarantees equality* before the law to all persons. 

It said tobacco and tobacco products are the only goods which have been singled out for hostile and discriminatory treatment *subjecting it to two regimes of indirect taxations.*

However, the court viewed that *except for* alcoholic liquor for human consumption, petroleum and petroleum products, stamp duty, tobacco and tobacco products and opium, *all other goods are liable only to GST*.

Tobacco, or tobacco products, are brought to GST and excise duty, while *opium is brought to GST and is also subject to value added tax*.

The court said the levy of excise duty on tobacco and tobacco products is *a matter of public policy* and that it would not interfere with the same.

It is felt that though the concept of ‘manufacturing’ *seems to be subsumed* in the concept of ‘supply’ the *legislature still retains the prerogative to levy* taxes on both activities.

Apparent discremination *but with in legislative competence*...! 😂


*SRIVATSAN.R.*

NACIN, Chennai

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