A Group of Ministers (GoM) on GST rate rationalization has put forth a recommendation to increase the tax rate on cigarettes, tobacco products, and aerated beverages to 35%, marking a significant rise from the current highest rate of 28%. The proposal, if accepted, could introduce a new 35% GST slab specifically for these so-called ‘sin’ goods.
The report, prepared by the GoM, is slated for discussion during the upcoming GST Council meeting on December 21 in Jaisalmer. The council, chaired by the Union Finance Minister and including state finance ministers, will decide on adopting the new tax structure. Alongside this proposal, the council is expected to deliberate on GST rates for life and health insurance premiums.
Overhauling the Tax Structure
The GoM’s report doesn’t stop at sin goods. It also proposes a major restructuring of GST rates for various sectors, including textiles. As per the recommendations:
- Textile items priced up to ₹1,500 would remain in the 5% slab.
- Products priced between ₹1,500 and ₹10,000 would face an 18% GST.
- Items priced above ₹10,000 would attract a 28% rate, bringing them in line with luxury goods.
This adjustment aims to simplify the tax framework while aligning higher-priced goods with premium tax slabs.
Luxury and Sin Goods in Focus
Currently, luxury items such as high-end cars and washing machines, as well as demerit goods like tobacco and aerated drinks, are subject to an additional cess on top of the highest GST rate of 28%. The GoM is also exploring the legal feasibility of removing this cess and incorporating higher taxes directly into the GST structure.
“The proposal suggests a 35% tax rate to address revenue concerns and deter the consumption of harmful products,” an official source stated.
Implications for the Economy
The GST rationalization effort, including this new tax slab, is part of a broader strategy to streamline tax rates and improve revenue collection. The government aims to balance public health objectives and economic growth by targeting high-demand and luxury goods.
The final decision on these recommendations will rest with the GST Council, whose meeting on December 21 will be closely watched for its potential to reshape the country’s indirect tax landscape.
