GST Shock for Tobacco Businesses: MRP-Based GST Valuation on Tobacco Products

Introduction:- The GST landscape for tobacco businesses has undergone a major shift. If you are engaged in the business of cigarettes, chewing tobacco, khaini, jarda, pan masala with tobacco, cigars or other notified tobacco products, the traditional method of paying GST on transaction value may no longer apply.

What Has Changed?

Traditionally, GST was payable under Section 15(1) of the CGST Act, 2017 on the actual transaction value. However, under the newly introduced RSP-based valuation mechanism notified under Section 15(5), GST for specified tobacco products may now be computed based on Retail Sale Price (MRP/RSP).

Relevant Legal Provision

Notification No. 19/2025 – Central Tax dated 31.12.2025, issued under Section 15(5) of the CGST Act, 2017, notifies specified tobacco supplies for RSP-based valuation. Rule 31D of the CGST Rules prescribes the valuation methodology.

GST valuation based on deemed RSP value Books vs GST Mismatch businesses may face reconciliation challenges because book turnover may differ from GST deemed turnover. Proper reconciliation working must be maintained for audit and litigation support.

Professional Advisory

Businesses dealing in tobacco products should immediately review their GST valuation mechanism, GSTR-1 reporting and invoice structure to ensure compliance with Rule 31D and Section 15(5).

Author Bio: 

Name - Rishabh Bansal

Qualification - CA and CFA

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