GST on Cigarettes, Tobacco, and Aerated Beverages Likely to Increase to 35%

The GoM proposes raising the GST on aerated beverages, cigarettes, and tobacco products from 28% to 35%, with final decisions to be made at the GST Council meeting on December 21
By Kavi Priya - On December 3, 2024 1:37 pm - 2 mins read
GST on cigarettes - GST on tobacco products - Cigarette tax in india - cigarettes tax rate in india - taxscan

The Group of Ministers ( GoM ) on GST rate rationalization has suggested increasing the tax on products like aerated drinks, cigarettes, and tobacco from 28% to 35%. This new rate would create a separate tax slab for these “sin goods.”

The GoM, led by Bihar Deputy Chief Minister Samrat Choudhary, finalized its recommendations on Monday. The GST Council will review these changes affecting 148 items in total during its meeting on December 21. The GST Council chaired by the Union Finance Minister and state finance ministers will make the final decision.

Proposed Changes

Sin Goods: Aerated drinks, cigarettes, and tobacco products would be taxed at 35%.

Clothing: GST on garments priced up to Rs. 1,500 would be 5%. Garments between Rs. 1,500 and Rs. 10,000 would be taxed at 18%, and those costing more than Rs. 10,000 would be taxed at 28%.

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Luxury Items: High-end products like shoes over Rs. 15,000, wristwatches costing more than Rs.25,000, and some cosmetics would see their GST increase to 28% from the current 18%.

These changes are to make up for potential revenue losses from reducing GST on some essential items.

Past Proposals

In earlier meetings, the GoM suggested reducing GST rates for:

  • Packaged Drinking Water (20 liters or more): From 18% to 5%.
  • Bicycles Under Rs. 10,000: From 12% to 5%.
  • Exercise Notebooks: From 12% to 5%.

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The GST system currently has four tax slabs: 5%, 12%, 18%, and 28%. Essential goods are taxed at lower rates or not taxed at all and luxury and harmful goods are taxed at the highest rate with an additional cess in some cases.

The new recommendations aim to create a special 35% rate for sin goods while keeping the existing four slabs unchanged.

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The GST Council will discuss these proposals and decide if the changes should be implemented. It will also consider exemptions on health and life insurance premiums.

If approved, these changes could bring more revenue to the government.

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