PAN Masala to Attract 40% GST, Says GST Council in 56th Meeting

The 56th meeting of the Goods and Services Tax (GST) Council was held at Sushma Swaraj Bhavan in New Delhi on September 03, 2025, chaired by Union Finance Minister Nirmala Sitharaman. The council has recommended a steep 40% Goods and Services Tax (GST) on pan masala, tobacco products, cigarettes and other “sin goods” such as caffeinated and sugary aerated drinks.

Sitharaman clarified that while the new GST structure, including the special 40% slab, has been approved, its rollout on pan masala and tobacco will not take effect immediately. The existing tax structure of 28% GST plus compensation cess will continue until the Centre clears outstanding loans and interest under the compensation cess account.

“The 40 percent special GST rate will apply to pan masala, tobacco products, cigarettes, and aerated drinks with added sugar. But the transition will take place after compensation cess obligations are fully met,” Sitharaman said in her post-meeting briefing.

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The taxes on daily essentials like paneer, soaps, shampoos, medicines, and farm equipment were reduced to 5% or nil, “sin goods” and luxury items were placed under the highest GST slab of 40%. Large cars, SUVs, motorcycles above 350cc and even private jets will also attract the same rate.

This move was welcomed by people as the hike rate on pan masala and tobacco will burden the buyers and could discourage consumption of harmful products. At the same time, industry players are expected to face higher compliance costs once the rate comes into effect.

The new GST rates on most goods and services will be implemented from September 22, 2025, the first day of Navratri. However, pan masala and tobacco products will continue at current rates until the notified date of transition.

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