Hey, if you're dealing with GST in India, especially for tobacco-related goods, there's a new advisory out that you might want to know about. It came from the GST Network team on January 23, 2026, and it's all about how to handle valuation based on Retail Sale Price, or RSP, for certain notified products starting February 1, 2026. I'll walk you through it step by step, like we're chatting over coffee, but keeping things straightforward and accurate.
First off, the background. Two notifications—19/2025 and 20/2025, both from December 31, 2025—introduced this RSP-based approach for specific tobacco items. Instead of basing the taxable value on what you actually sell the goods for, you now use the RSP printed on the package. That means GST gets calculated from that RSP, no matter the deal between buyer and seller. This applies to a list of HSN codes, which cover things like pan masala (2106 90 20), unmanufactured tobacco (2401), cigars and cigarettes (2402), other manufactured tobacco except biris (2403), and some inhalation products with tobacco or nicotine substitutes (2404 11 00 and 2404 19 00).
Now, how do you compute the tax? It's pretty formulaic. The tax amount is (RSP times the GST rate percentage) divided by (100 plus the sum of applicable tax rates). Then, the deemed taxable value is just the RSP minus that tax amount. For example, say you have a pack with an RSP of 100 rupees, and you're selling 1,000 packs. Total RSP is 100,000 rupees. If IGST is 40%, the tax comes out to (100,000 times 40) divided by 140, which is about 28,571.43 rupees. So the deemed taxable value is 100,000 minus that, or 71,428.57 rupees.
But here's where it gets interesting in practice. Your actual commercial deal might be different—maybe a gross sale of 80,000 rupees minus a 20,000 discount, netting 60,000. The tax is still 28,571.43 based on RSP, so the total invoice becomes 60,000 plus tax, equaling 88,571.43. Notice how the deemed value plus tax adds up to the full RSP of 100,000, which is more than your net sale? That's fine under the new rules, but it clashes with how the current GST systems are set up.
Those systems—e-invoice, e-way bill, and GSTR-1, 1A, or IFF—are built around transaction values. They check that taxable value plus tax doesn't exceed the total invoice value, and if it does, you get an error. In RSP cases, it often will exceed, based on the commercial numbers.
To fix this without breaking anything, the advisory suggests a specific way to report. For e-invoice and e-way bill:
- Put the net sale value (your actual commercial consideration, like 60,000) in the taxable value field.
- Report the tax amount as calculated from the RSP formula (28,571.43).
- Make the total invoice value the sum of those two (88,571.43).
The same goes for GSTR-1 and the others. If the system auto-calculates a different tax, edit it to match the RSP-based amount. You're basically self-assessing these fields and verifying them before submission. This is only for those specific HSN codes, and it's meant as a helper to make filing smoother— it doesn't change the actual law or what tax you owe.
One key reminder: Always compute the real taxable value and pay tax based on RSP as per the notifications. Don't apply this to non-notified goods, and double-check your classifications. The advisory stresses that this is for info purposes only, not legal advice—stick to the official GST laws for compliance.
If you're in the tobacco trade or handling these supplies, grab the full PDF from the GST site for the details. It includes that illustrative invoice I mentioned. Questions? Feel free to dig deeper, but this should give you a solid grasp without the jargon overload.
Disclaimer: This blog post is prepared solely for educational and informational purposes and does not constitute legal advice. Readers are advised to rely on the relevant statutory provisions for meeting their compliance requirements. For all official or legal purposes, reference shall be made to the applicable provisions of the GST laws, rules, and notifications.
Ref Link: https://www.gst.gov.in/newsandupdates/read/646 Download PDF: https://tutorial.gst.gov.in/downloads/news/advisory_on_rsp_based_valuation_gstr-1_final_version.pdf
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