Pan masala and tobacco: GST value now worked out from the retail sale price, from 1 February 2026
From 1 February 2026, the value of supply of pan masala and notified tobacco goods on which a retail sale price is declared is the retail sale price less the tax, under new rule 31D of the CGST Rules read with Notification No. 19/2025-Central Tax.
Key facts
- In force
- 1 February 2026
- Who it affects
- Manufacturers, distributors and traders of pan masala and tobacco products
- Source
- CBIC Notification No. 20/2025-Central Tax (rule 31D) and No. 19/2025-Central Tax, 31 December 2025 ↗
- What it is
- Rule change
- Section
- GST
- Published
- 1 February 2026
In 30 seconds
- Notification No. 19/2025-Central Tax (section 15(5)) and No. 20/2025-Central Tax (CGST Fifth Amendment Rules, 2025), both dated 31 December 2025; in force 1 February 2026.
- Goods: pan masala (2106 90 20), unmanufactured tobacco (2401), cigarettes and cigars (2402), other manufactured tobacco other than biris (2403), and products under 2404 11 00 and 2404 19 00.
- Rule 31D: value = retail sale price less tax; tax = RSP × rate ÷ (100 + sum of rates).
- Rule 86B: a registered person other than a manufacturer is exempt for these goods where the supplier paid tax on the RSP basis.
हिंदी में सार
1 फ़रवरी 2026 से पान मसाला और तय तंबाकू उत्पादों (बीड़ी को छोड़कर) पर GST का मूल्य पैक पर छपे retail sale price से टैक्स घटाकर निकलेगा — नया नियम 31D, Notification 19/2025 और 20/2025-Central Tax (31 दिसंबर 2025)। टैक्स = RSP × दर ÷ (100 + दरों का जोड़)। निर्माता के अलावा अन्य पंजीकृत व्यक्ति पर इन वस्तुओं के लिए नियम 86B लागू नहीं होगा, अगर सप्लायर ने RSP पर टैक्स दिया है।
Before and now
Value of supply under the general valuation rules of the CGST Act and Rules.
For the listed goods, value = retail sale price declared on the package less the tax (rule 31D).
The two notifications
On 31 December 2025, on the recommendations of the GST Council, the Government issued two notifications that take effect from 1 February 2026:
- Notification No. 19/2025-Central Tax, under section 15(5) of the CGST Act, adds a clause (iv) to Notification No. 49/2023-Central Tax for the listed goods on which a retail sale price is declared.
- Notification No. 20/2025-Central Tax — the Central Goods and Services Tax (Fifth Amendment) Rules, 2025 — inserts rule 31D and adds a clause in rule 86B.
Goods covered
| Tariff | Goods |
|---|---|
| 2106 90 20 | Pan masala |
| 2401 | Unmanufactured tobacco; tobacco refuse (other than tobacco leaves) |
| 2402 | Cigars, cheroots, cigarillos and cigarettes |
| 2403 | Other manufactured tobacco and substitutes, homogenised or reconstituted tobacco, extracts and essences (other than biris) |
| 2404 11 00, 2404 19 00 | Products containing tobacco, reconstituted tobacco or nicotine substitutes, for inhalation without combustion |
How the value is worked out
Under rule 31D, the value of supply is deemed to be the retail sale price declared on the goods, less the amount of tax. The tax is:
Tax amount = (Retail sale price × tax rate in % of applicable taxes) ÷ (100 + sum of applicable tax rates)Rule 31D(2), CGST Rules
“Applicable tax” means IGST, or CGST, SGST or UTGST, as the case may be. Illustration, with a rate assumed only to show the arithmetic: on a retail sale price of ₹1,000 and applicable taxes adding up to 40%, tax = 1,000 × 40 ÷ 140 = ₹285.71, and the value is ₹714.29.
Which price counts as the retail sale price
- It is the maximum price declared on the package at which the goods may be sold to the ultimate consumer, including all taxes, duties, surcharge or cess.
- If more than one retail sale price is declared, the highest is taken.
- If the price is altered upwards at any stage before, during or after the supply, the altered price is taken.
- If different prices are declared for different areas, each price applies to the goods meant for that area.
Rule 86B for traders
A new clause (f) in the first proviso to rule 86B exempts a registered person other than a manufacturer from that rule, but only for goods under rule 31D on which the supplier has paid tax on the basis of the retail sale price.
Questions and answers
From when does RSP-based valuation apply?
Both notifications — No. 19/2025-Central Tax and No. 20/2025-Central Tax — come into force on 1 February 2026.
Are biris covered?
No. Heading 2403 in the Table covers other manufactured tobacco “other than biris”.
The pack shows two prices. Which one is used?
Where more than one retail sale price is declared, the maximum of them is deemed to be the retail sale price.
Does rule 86B still apply to a distributor?
A registered person other than a manufacturer is exempted from rule 86B for goods under rule 31D on which the supplier paid tax on the retail sale price basis.
Published 1 February 2026. Updated 8 October 2026. This report is for general information and is not professional advice. Read the source document before acting on it.