GST Council to Review 35% GST on Cigarettes, Tobacco, and Aerated Drinks

The GST Council is set to discuss a Group of Ministers’ (GoM) proposal to raise GST on sin goods like cigarettes, tobacco, and aerated drinks to 35%, up from the current 28%, during its December 21 meeting.

The Goods and Services Tax (GST) Council is preparing to deliberate a significant proposal made by the Group of Ministers (GoM) on GST rate rationalisation. The GoM, chaired by Bihar Deputy Chief Minister Samrat Choudhary, has recommended increasing the GST rate on certain sin goods, including cigarettes, tobacco products, and aerated drinks, from 28% to 35%.

The rationale behind this move is to increase revenue while curbing the consumption of products that are considered harmful to health. This is part of a broader effort to streamline the tax structure and ensure a balanced approach to taxation.

Changes in GST for Readymade Garments

Apart from sin goods, the GoM has also suggested revising GST rates for readymade garments:

• Garments priced up to ₹1,500 would attract 5% GST.
• Those costing between ₹1,500 and ₹10,000 would be taxed at 18%.
• Garments priced above ₹10,000 would fall under the 28% GST slab.

The GoM has proposed changes for 148 items, aiming to achieve a positive net revenue impact while maintaining affordability for essential goods.

GST Council Meeting on December 21

The recommendations from the GoM will be reviewed during the GST Council meeting scheduled for December 21. The council, chaired by the Union Finance Minister and comprising state finance ministers, will take a final decision on these proposals.

An official stated, “The existing GST structure with slabs of 5%, 12%, 18%, and 28% will remain unchanged, with the addition of a special 35% rate for certain demerit goods.” Essential items will continue to be exempt or taxed at lower rates, while luxury and demerit goods will attract higher rates and cess.

Previous Proposals by the GoM

In its October meeting, the GoM recommended various adjustments:

• Packaged drinking water (20 litres and above): GST reduction from 18% to 5%.
• Bicycles costing under ₹10,000: GST reduction from 12% to 5%.
• Exercise notebooks: GST reduction from 12% to 5%.
• Shoes priced above ₹15,000 per pair: GST increase from 18% to 28%.
• Wristwatches costing over ₹25,000: GST increase from 18% to 28%.

These recommendations were aimed at reducing the tax burden on certain essential goods while increasing taxes on luxury and demerit items.

Conclusion

The proposal to hike GST rates on sin goods to 35% is a significant step in India’s tax policy. While it is expected to boost revenue and discourage harmful consumption, the final decision rests with the GST Council. The upcoming meeting will determine whether these changes will be implemented and how they will impact various sectors.

Disclaimer

The information provided in this article is based on available reports and official statements. For accurate details and updates, refer to the GST Council’s official announcements.