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Topic 158 · Economy, Budget & Banking

New duty regime on tobacco and pan masala

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Revise the 12 points first Book 1 RATNA

Core Trigger: From 1 February 2026, GST of 40 per cent applies to pan masala and cigarettes, and 18 per cent to biris.
Levies: A Health and National Security Cess applies on pan masala; an additional excise duty is charged on tobacco.
Current Head: The GST Council is chaired by the Union Finance Minister, Nirmala Sitharaman.
Key Term: The compensation cess, levied on demerit goods to compensate States for GST revenue loss, is replaced.
Rates: Cigarettes and pan masala bear the 40 per cent demerit rate; biris are taxed lower, at 18 per cent.
Stakeholders: The GST Council, with Centre and States, recommends rates; the Centre levies the new cess and excise.
India Link: The change replaces the compensation cess with Centre-levied charges on sin goods, ending that cess for these products.
Headquarters: The GST Council Secretariat is located in New Delhi.
Founded: GST took effect on 1 July 2017, introduced by the 101st Constitutional Amendment Act, 2016.
Landmark: Union of India v Mohit Minerals (2022): the Supreme Court held GST Council recommendations are persuasive, not binding.
Articles: Article 246A gives GST power, Article 279A creates the GST Council, and Article 269A governs inter-State supplies.
Doctrine: Under Article 270, cesses and surcharges stay outside the divisible pool, so the Centre keeps them entirely.

Question 1 of 10

From 1 February 2026, what GST rate applies to pan masala and cigarettes?

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Answer: (C) 40 per cent

Core Trigger: From 1 February 2026, GST of 40 per cent applies to pan masala and cigarettes, and 18 per cent to biris.From Book 1 RATNA, topic 158, point 1

Question 2 of 10

Which cess now applies on pan masala?

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Answer: (D) Health and National Security Cess

Levies: A Health and National Security Cess applies on pan masala; an additional excise duty is charged on tobacco.From Book 1 RATNA, topic 158, point 2

Question 3 of 10

Who chairs the GST Council?

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Answer: (C) The Union Finance Minister

Current Head: The GST Council is chaired by the Union Finance Minister, Nirmala Sitharaman.From Book 1 RATNA, topic 158, point 3

Question 4 of 10

The compensation cess on demerit goods was meant to compensate States for what?

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Answer: (D) Loss of GST revenue

Key Term: The compensation cess, levied on demerit goods to compensate States for GST revenue loss, is replaced.From Book 1 RATNA, topic 158, point 4

Question 5 of 10

What GST rate applies to biris from 1 February 2026?

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Answer: (B) 18 per cent

Rates: Cigarettes and pan masala bear the 40 per cent demerit rate; biris are taxed lower, at 18 per cent.From Book 1 RATNA, topic 158, point 5

Question 6 of 10

Consider: 1. The GST Council recommends rates. 2. The States levy the new cess and excise. Which is/are correct?

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Answer: (A) Only 1

Stakeholders: The GST Council, with Centre and States, recommends rates; the Centre levies the new cess and excise.From Book 1 RATNA, topic 158, point 6

Question 7 of 10

Where is the GST Council Secretariat located?

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Answer: (C) New Delhi

Headquarters: The GST Council Secretariat is located in New Delhi.From Book 1 RATNA, topic 158, point 8

Question 8 of 10

Which amendment introduced GST, effective 1 July 2017?

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Answer: (D) 101st Amendment Act, 2016

Founded: GST took effect on 1 July 2017, introduced by the 101st Constitutional Amendment Act, 2016.From Book 1 RATNA, topic 158, point 9

Question 9 of 10

In Union of India v Mohit Minerals (2022), the Supreme Court held GST Council recommendations are what?

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Answer: (C) Persuasive, not binding

Landmark: Union of India v Mohit Minerals (2022): the Supreme Court held GST Council recommendations are persuasive, not binding.From Book 1 RATNA, topic 158, point 10

Question 10 of 10

Consider: 1. Article 246A creates the GST Council. 2. Article 270 keeps cesses outside the divisible pool. Which is/are correct?

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Answer: (B) Only 2

Articles: Article 246A gives GST power, Article 279A creates the GST Council, and Article 269A governs inter-State supplies.From Book 1 RATNA, topic 158, point 11

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