The provisions of Taxation Law (Amendment) Act, 2007 shall be effective from 1-4-2007.

Accordingly, state governments have got the power to impose sales tax on tobacco and tobacco products.  These products have be removed from the purview of "declared goods".  Further, the Amendment Act omits section 4 and the second schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957.and amends the first schedule.

Enabling provisions have been made for the States to levy VAT on Tobacco.  Tobacco has been dropped from the First Schedule of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 as also from the list of declared goods, to enable the States to levy VAT on Tobacco, at rate higher than 4%.

Sales tax on tobacco: states may levy VAT on tobacco products, enabling higher state-level tax rates. State governments obtain authority to impose sales tax and levy value added tax on tobacco products after the Taxation Law (Amendment) Act, 2007; tobacco is removed from the list of declared goods and dropped from the First Schedule of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, amending and omitting specified provisions to enable States to set VAT rates on tobacco above the prior ceiling.