GST advisory on RSP-based valuation of notified tobacco products
GST Advisory on RSP-Based Valuation of Notified Tobacco Products (Effective 1 February 2026)
1. Background
Vide Notification Nos. 19/2025–Central Tax and 20/2025–Central Tax, both dated 31 December 2025, the Government has notified Retail Sale Price (RSP)-based valuation for specified tobacco and tobacco-related products, effective from 01 February 2026.
The notifications cover the following HSN codes and goods:
| S. No. | Chapter / Heading / Sub-heading | Description of Goods |
|---|---|---|
| 1 | 2106 90 20 | Pan masala |
| 2 | 2401 | Unmanufactured tobacco; tobacco refuse (other than tobacco leaves) |
| 3 | 2402 | Cigars, cheroots, cigarillos and cigarettes of tobacco or substitutes |
| 4 | 2403 | Other manufactured tobacco and substitutes (other than biris) |
| 5 | 2404 11 00 | Tobacco products for inhalation without combustion |
| 6 | 2404 19 00 | Nicotine substitute products for inhalation without combustion |
Under the above notifications, GST valuation shall be based on the declared RSP printed on the package, irrespective of the actual transaction value or commercial consideration between supplier and recipient.
2. Computation of GST under RSP-Based Valuation
2.1 Statutory Formula
For notified goods, GST shall be computed as follows:
- Tax Amount = (RSP × GST Rate in % of applicable taxes) / (100 + Sum of applicable tax rate)
- Deemed Taxable Value = = RSP − Tax Amount
Accordingly, GST liability is determined with reference to RSP (tax-inclusive) and not the actual sale price.
2.2 Illustrative Example
A. Item Details (RSP-Based Goods)
| Particulars | Value |
|---|---|
| Relevant HSN | 2403 |
| RSP per pack | ₹100 |
| Quantity | 1,000 packs |
| Total RSP | ₹1,00,000 |
B. Statutory Computation (IGST @ 40%)
| Particulars | Computation | Amount (₹) |
|---|---|---|
| Total RSP | 100 × 1,000 | 1,00,000.00 |
| IGST Amount | (1,00,000 × 40) / 140 | 28,571.43 |
| Deemed Taxable Value | 1,00,000 − 28,571.43 | 71,428.57 |
C. Actual Commercial Consideration
| Particulars | Amount (₹) |
|---|---|
| Gross Sale Value | 80,000.00 |
| Less: Discount | (20,000.00) |
| Net Sale Value | 60,000.00 |
D. Invoice Value
| Particulars | Amount (₹) |
|---|---|
| Net Sale Value | 60,000.00 |
| Add: IGST (RSP-based) | 28,571.43 |
| Total Invoice Value | 88,571.43 |
3. Existing System Validations (e-Invoice, e-Way Bill, GSTR-1/1A/IFF)
Current GST systems are designed on a transaction-value model and enforce the validation:
Taxable Value + Tax Amount ≤ Total Invoice Value
In RSP-based valuation cases, reporting the deemed taxable value (₹71,428.57) along with tax (₹28,571.43) would result in the sum exceeding the invoice value based on commercial consideration, thereby triggering system errors.
4. Reporting Guidance for RSP-Based Valuation Supplies
4.1 Reporting in e-Invoice and e-Way Bill
For supplies covered under RSP-based valuation:
a) Taxable Value Field
Report the Net Sale Value (actual commercial consideration)
→ ₹60,000.00
b) Tax Amount Field
Report tax strictly computed as per RSP-based formula
→ ₹28,571.43
c) Total Invoice Value
Report Net Sale Value + Tax Amount
→ ₹88,571.43
This ensures compliance with system validation rules.
4.2 Reporting in GSTR-1 / GSTR-1A / IFF
a) Report Net Sale Value in the taxable value field
→ ₹60,000.00
b) Report GST amount as per RSP-based valuation, even if system-calculated tax differs. Manual editing is permitted to reflect the correct statutory tax liability.
c) Report Total Invoice Value as:
→ ₹60,000.00 + ₹28,571.43 = ₹88,571.43
5. Reporting Mechanism – Trade Facilitation Measure
To enable seamless compliance:
a) Taxpayers shall:
- Report Net Sale Value as taxable value
- Report GST computed on RSP
- Report Total Invoice Value as the sum of the above
All values are self-assessed and self-declared by the taxpayer, and system-calculated values must be corrected wherever required.
b) This mechanism is restricted exclusively to the HSNs notified under the aforesaid notifications and does not dilute statutory valuation provisions under GST law.
6. Advisory to Stakeholders
a) Tax shall be discharged strictly on RSP-based deemed taxable value, while reporting shall follow the prescribed facilitation mechanism.
b) Taxpayers must exercise due diligence in:
- Correct classification of goods
- Applying RSP-based valuation only where statutorily applicable
