GSTN Issues Advisory on RSP-Based Valuation and Reporting of Notified Tobacco Goods
From 1 February 2026, GST on notified tobacco goods will be calculated on RSP, while taxpayers must report net sale value and RSP-based tax separately in GST returns to avoid system errors.
The new Goods and Services Tax Network (GSTN) advisory explains how GST has to be calculated and reported for certain tobacco and tobacco-related products where valuation is now based on the Retail Sale Price (RSP) printed on the pack, and not on the actual selling price.
The Government has issued notifications dated 31 December 2025 stating that from 1 February 2026, GST on specified tobacco goods will be charged on RSP-based valuation. This means GST will be calculated on the RSP shown on the package, even if the goods are sold at a lower price due to discounts or other business reasons.
The following goods are covered under this RSP-based valuation:
| 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 of tobacco substitutes |
| 4 | 2403 | Other manufactured tobacco and manufactured tobacco substitutes; “homogenised” or “reconstituted” tobacco; tobacco extracts and essences (other than biris) |
| 5 | 2404 11 00 | Products containing tobacco or reconstituted tobacco intended for inhalation without combustion |
| 6 | 2404 19 00 | Products containing tobacco or nicotine substitutes intended for inhalation without combustion |
Under this system, the RSP is treated as inclusive of GST. The tax amount has to be calculated using the given formula, and the taxable value is derived from the RSP, not from the actual invoice price charged to the buyer.
The advisory explains that this creates a problem in GST systems like e-Invoice, e-Way Bill and GSTR-1, because these systems work on transaction value. In many cases, the taxable value plus tax (based on RSP) may become higher than the actual invoice value after discount.
To avoid system errors, GSTN has advised a special way of reporting. Taxpayers should report the actual net sale value in the taxable value field. The GST amount, however, must be calculated strictly on the basis of RSP as required by law. The total invoice value should be shown as net sale value plus the RSP-based tax amount.
The same method has to be followed while reporting details in e-Invoice, e-Way Bill and GSTR-1 / GSTR-1A / IFF. If the system auto-fills a different tax amount, taxpayers need to manually correct it to match the RSP-based tax.
GSTN has clarified that this reporting method is only to help with system validations and does not change the legal requirement. Tax must still be paid strictly on RSP for the notified tobacco goods, and taxpayers should be careful while classifying and reporting such supplies.
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