The Goods and Services Tax Network (GSTN) has issued an advisory clarifying the reporting of taxable value and tax liability under Retail Sale Price (RSP)-based valuation for specified tobacco and tobacco-related products. The advisory provides guidance on correct reporting in e-Invoice, e-Way Bill, and GSTR-1/ GSTR-1A/ Invoice Furnishing Facility (IFF).
The RSP-based valuation mechanism will come into effect from February 1, 2026, following notifications issued by the government on December 31, 2025.
Background: Shift to RSP-Based Valuation
Under Notification Nos. 19/2025-Central Tax and 20/2025-Central Tax, GST valuation for certain notified tobacco goods has been moved from transaction value to Retail Sale Price (RSP) printed on the package.
This means that GST liability will now be determined based on the declared RSP, regardless of the actual sale price or commercial consideration between the supplier and recipient.
Tobacco Goods Covered Under RSP-Based Valuation
The advisory applies to the following HSN codes and product categories:
- 2106 90 20 – Pan masala
- 2401 – Unmanufactured tobacco and tobacco refuse
- 2402 – Cigars, cheroots, cigarillos and cigarettes
- 2403 – Other manufactured tobacco and substitutes (excluding bidis)
- 2404 11 00 – Tobacco or reconstituted tobacco for inhalation without combustion
- 2404 19 00 – Nicotine or tobacco substitutes for inhalation without combustion
How GST Is Computed Under RSP-Based Valuation
For notified goods, GST must be calculated using the statutory RSP formula, treating the RSP as tax-inclusive:
- Tax Amount = (RSP × applicable GST rate) ÷ (100 + total tax rate)
- Deemed Taxable Value = RSP − Tax Amount
This computation applies irrespective of discounts or lower transaction values.
System Validation Issue Explained
GSTN clarified that existing systems, e-Invoice, e-Way Bill, and GSTR-1/1A/IFF, are designed around a transaction-value model, which enforces the validation rule: Taxable Value + Tax Amount ≤ Total Invoice Value
In RSP-based valuation cases, reporting the deemed taxable value derived from RSP can violate this rule, as the statutory taxable value may exceed the commercial consideration. This can lead to system errors if reported incorrectly.
Reporting Guidance for Taxpayers
To address this mismatch, GSTN has prescribed a special reporting method for notified RSP-based supplies:
For e-Invoice and e-Way Bill
- Taxable Value field: Report the Net Sale Value (actual commercial consideration)
- Tax Amount field: Report tax calculated strictly as per the RSP-based formula
- Total Invoice Value: Report Net Sale Value + Tax Amount
This ensures system validation is satisfied while tax is paid correctly under law.
For GSTR-1 / GSTR-1A / IFF
- Report the Net Sale Value in the taxable value column
- Edit the tax amount, if required, to match the statutory RSP-based tax liability
- Ensure the total invoice value equals Net Sale Value plus tax
Scope and Compliance Responsibility
GSTN clarified that:
- This reporting mechanism applies only to the notified HSNs
- It is a trade facilitation measure, without altering statutory valuation rules
- All values must be self-assessed and verified by taxpayers before submission
Taxpayers are also advised to correctly classify goods and apply RSP-based valuation strictly where notified.
Key Takeaway for Taxpayers
From February 1, 2026, suppliers of notified tobacco products must:
- Pay GST based on RSP, not transaction value
- Follow GSTN’s prescribed reporting format to avoid system errors
- Ensure accurate classification and valuation to remain compliant
The advisory has been issued for guidance and does not replace statutory provisions under GST law.
GSTN Advisory dated 23/01/2026: RSP-Based Valuation of Notified Tobacco Goods under GST