Finance minister Arun Jaitley told reporters that the move was aimed at fixing an anomaly that had crept in during fixing the rates. While the peak GST rate of 28% stays and so does 5% ad valorem cess on top of it, the fixed cess has been hiked between Rs 485 and Rs 792 per thousand sticks.

The increase in cess is expected to help the government raise around Rs 5,000 crore of additional tax revenue which would have been pocketed by manufacturers, the minister told reporters after an emergency meeting of the GST Council.

In May, the GST Council had fixed rates for tobacco products including cigarettes but it was was lower than the incidence before the new regime kicked in. The choice before cigarette manufacturers was to either pass on the benefit of lower taxes to consumers by way of cutting rates or pocketing the windfall. The manufacturers did not pass on the gain, the government said.

Jaitley said to correct this, the GST Council has raised the fixed cess by Rs 485 to 792 per thousand sticks. Pratik Jain, partner and leader indirect tax at consulting firm PwC India, said, "GST Council meeting shows the inclination and flexibility to take quick decisions. One would hope that few other issues such as GST rate on existing car leases, ambit of registered trade mark for taxation of packed food products, etc are addressed in the next meeting."

Jaitley also said GST Council will meet in first week of August to review the progress of implementation of GST, which was rolled out on July 1.