The GST Council, in its meeting held on 17 July 2017, approved an increase in the Compensation Cess on cigarettes with the objective of restoring the overall tax incidence on cigarettes to levels prevailing in the pre-GST regime. The Council noted that although cigarettes were placed in the highest GST slab of 28 percent, the compensation cess initially notified, based on specific excise duty rates, did not fully account for the cascading effect of taxes that existed earlier, where VAT was levied on values inclusive of excise duty. As a result, the total tax burden on cigarettes under GST had inadvertently fallen below pre-GST levels. Recognising that cigarettes are demerit goods and that any reduction in their tax incidence would be undesirable from both public health and revenue perspectives, the Council reviewed the cess structure and recommended higher compensation cess rates across all categories of cigarettes, differentiated by length and whether filter or non-filter. The revised cess structure involved significant increases in the specific cess component per thousand cigarettes, with effect from midnight of 17–18 July 2017. These changes ensured that the combined burden of GST and compensation cess on cigarettes was broadly aligned with the earlier indirect tax regime. The decision reinforced the Council’s commitment to protecting revenue interests of States and maintaining appropriate taxation levels on demerit goods under the GST framework.