GST Advisory Streamlines Tobacco Products' Pricing and Taxation

GST Network has issued an advisory on reporting retail sale price-based valuation for tobacco products like pan masala in e-Invoice, e-Way Bill, GSTR-1, and Invoice Furnishing Facility. This move, effective February 1, coincides with a new health cess imposed by the Finance Ministry. The updated guidelines aim to facilitate accurate tax reporting and compliance.

GST Network (GSTN) has released a new advisory focused on retail sale price-based valuation of tobacco products, including pan masala, for documentation in e-Invoice, e-Way Bill, and GSTR-1, as well as the Invoice Furnishing Facility. This step comes as the Finance Ministry introduces an additional health and national security cess on pan masala, which already carries the highest 40 percent Goods and Services Tax (GST) rate, becoming effective from February 1. The overall tax incidence remains at 88 percent.

Starting February 1, the GST will be calculated based on a percentage of the retail sale price of pan masala, and the corresponding cess will be calculated on the manufacturer's installed production capacity. According to the GSTN advisory, taxpayers must report the net sale value in the appropriate field, following the RSP-based valuation formula. This reporting mechanism serves as a trade facilitation measure without altering statutory or legal requirements under GST law.

AMRG & Associates Senior Partner Rajat Mohan noted that this advisory offers needed clarity after the transition to RSP-based taxation, starting February 2026. The guidelines solve system-level issues in e-invoicing, e-way bills, and GSTR-1 filings, which depend primarily on transaction values. This measure will aid manufacturers, importers, and distributors of tobacco products and also improve tax authority reporting accuracy, minimizing unnecessary disputes.

(With inputs from agencies.)