🔔 GST Advisory: RSP-Based Valuation for Tobacco Products (w.e.f. 01-02-2026)
📌 1. Background
Vide Notification No. 19/2025-CT & 20/2025-CT dated 31-12-2025, certain tobacco and tobacco-related goods are shifted to Retail Sale Price (RSP)-based valuation under GST.
👉 GST is now calculated on RSP (MRP), not on actual transaction value, irrespective of discounts or sale consideration.
📦 2. Goods Covered (HSN-wise)
RSP-based valuation applies to:
| HSN | Description |
|---|---|
| 2106 90 20 | Pan Masala |
| 2401 | Unmanufactured tobacco |
| 2402 | Cigarettes, cigars, cheroots |
| 2403 | Other manufactured tobacco (except biris) |
| 2404 11 00 | Tobacco products for inhalation (non-combustion) |
| 2404 19 00 | Nicotine substitutes for inhalation |
🧮 3. How GST is Computed (Core Formula)
Since RSP is tax-inclusive, GST must be extracted as follows:
Tax Amount
RSP × GST Rate÷(100+GSTRate)\text{RSP × GST Rate} ÷ (100 + GST Rate)
OR, Simply You can calculate Taxable Amount
MRP ÷ (100+GST rate) x 100
Deemed Taxable Value
RSP − Tax Amount\text{RSP − Tax Amount}
📌 Actual sale price / discount is irrelevant for tax computation.
🧾 4. Practical Illustration (IGST @ 40%)
RSP per pack: ₹100
Total packs: 1,000
Total RSP: ₹1,00,000
| Particulars | Amount (₹) |
|---|---|
| IGST (40%) | 28,571.43 |
| Deemed Taxable Value (as per law) | 71,428.57 |
Commercial transaction (actual):
-
Gross value: ₹80,000
-
Discount: ₹20,000
-
Net Sale Value: ₹60,000
➡️ GST payable remains ₹28,571.43 (on RSP, not on ₹60,000)
⚠️ 5. System Issue (Why Special Reporting Is Needed)
GST systems (e-Invoice, E-Way Bill, GSTR-1) are built on transaction-value logic and throw an error if:
Taxable Value + Tax > Invoice Value
This happens in RSP cases because:
-
Deemed taxable value (₹71,428.57)
-
Tax (₹28,571.43)
-
Commercial value (₹60,000)
✅ 6. GSTN-Prescribed Reporting Method (VERY IMPORTANT)
For e-Invoice, e-Way Bill & GSTR-1 / IFF:
✔️ What to Report
| Field | What to Enter |
|---|---|
| Taxable Value | Net Sale Value (actual consideration) → ₹60,000 |
| Tax Amount | GST as per RSP formula → ₹28,571.43 |
| Invoice Value | Taxable Value + Tax → ₹88,571.43 |
✔ This ensures:
Taxable Value + Tax ≤ Invoice Value (system validation passes)
📌 Even if the system auto-calculates tax wrongly in GSTR-1, taxpayer must edit and report correct RSP-based tax.
