NEW DELHI, Jan 23: GST Network (GSTN)today issued an advisory on retail sale price-based valuation of tobacco products like pan masala for reporting in e-Invoice, e-Way Bill and monthly sales return form GSTR-1 and invoice furnishing facility (IFF).
The Finance Ministry has notified a health and national security cess on pan masala manufacturing, on top of the highest 40 per cent Goods and Services Tax (GST) rate, effective February 1. The total tax incidence will be at the existing level of 88 per cent.
Currently, 28 per cent GST plus a compensation cess is levied on pan masala.
Beginning February 1, GST will be levied as a percentage of the retail sale price of pan masala, and the cess will be levied on installed production capacity of the manufacturer.
Issuing the advisory, GSTN said taxpayers are required to report the net sale value in the taxable value field. The tax amount shall be reported in accordance with the RSP-based valuation formula, and the total invoice value shall be reported as the sum of the net sale value and the tax amount.
These three fields shall be self-assessed, self-calculated, and correctly furnished by the taxpayer, and the accuracy thereof shall be duly verified prior to submission.
“This reporting mechanism is only devised as a trade facilitation measure, without any dilution of the statutory provisions or legal requirements prescribed under the GST law,” GSTN said.
The GST on retail sale price will provide the value train as to how much was sold, at what price. The Cess data will provide the capacity trail of how much could have been produced by the manufacturer.
Taxpayers shall ensure that the taxable value is computed strictly in accordance with the notified RSP-based valuation formula, and that tax is discharged on such taxable value, the advisory noted.
AMRG & Associates Senior Partner Rajat Mohan said the GSTN advisory on RSP-based valuation of notified tobacco products brings timely and practical clarity after the shift to RSP-based taxation from 1 February 2026.
While tax is legally required to be calculated on the declared retail sale price, the advisory sensibly resolves system-level issues in e-invoicing, e-way bills and GSTR-1, which are designed around transaction value.
Allowing taxpayers to report the actual net sale value for invoicing purposes, while paying GST strictly as per the RSP-based formula, helps avoid technical errors and unnecessary compliance friction.
“This clarification will primarily benefit manufacturers, importers, and distributors of tobacco and related products, as well as ERP and compliance teams, by enabling smoother return filing and invoice generation. It also benefits tax authorities by improving reporting accuracy and reducing avoidable disputes arising from system mismatches,” Mohan said. (PTI)
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