The Group of Ministers (GoM) proposed to raise Goods and Service Tax ( GST ) rate on tobacco and sugar-sweetened beverages (SSB) to 35% from the current 28%. The GST Council is scheduled to review the proposals on December 21, 2024.
Since the introduction of the Goods and Services Tax ( GST ), there have been no increases in GST rates on harmful products such as tobacco and sugar-sweetened beverages, except for two minor hikes in National Calamity Contingent Duties (NCCD) on tobacco. It is reported that the Constant GST rate has made these products more affordable, undermining efforts to curb their consumption.
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Being the second-largest consumer of tobacco globally, India is leading towards countries having less percentage of healthy people. Due to the high use of Tobacco, over 3,500 daily deaths in India. In 2017, the annual economic burden of tobacco use and second-hand smoke was estimated at ₹2,340 billion, or 1.4% of GDP-far exceeding the 2538 billion collected annually in tobacco tax revenue.
The proposed increase could lead to 5.5% price increase for beedis, a 5% drop in consumption, and an 18.6% revenue rise. A 3.9% price increase for cigarettes, a 1.3% decline in consumption, and a 6.4% revenue growth. A 3% price increase for smokeless tobacco, a 2.7% drop in consumption, and a 1.9% revenue increase. An additional ₹43 billion annually in revenue.
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The GoM also proposed increasing the GST on luxury items, such as shoes costing above Rs 15,000 and wristwatches priced above Rs 25,000, to 28%. The goal is to align tax rates more closely with product value.However, some say that the increase could affect people from all sections of society, especially those from low and middle-income households.
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