Sin tax surge: Cigarettes, aerated drinks may face 35% GST
What's the story
The Group of Ministers (GoM) has suggested increasing the Goods and Services Tax (GST) on aerated beverages, cigarettes, and tobacco products. The proposed rate is a major jump from the existing 28% to 35%. The proposal was made during a meeting convened by the GoM under Bihar's Deputy Chief Minister Samrat Chaudhary. This move aims to generate additional revenue for the government and potentially discourage consumption of "sin goods" like cigarettes and tobacco.
Tax adjustment
New tax slab proposed amid existing 4-tier structure
The proposed 35% tax on tobacco products and aerated beverages is a new addition to the existing four-tier GST structure. The current system has slabs at 5%, 12%, 18%, and 28%.
Apparel taxation
GoM suggests tax rate revisions for apparel
The GoM has also proposed changes in the tax rates on clothing. As per their suggestion, ready-made garments priced up to ₹1,500 will attract a 5% GST. Those priced between ₹1,500 and ₹10,000 will be charged an 18% GST. Garments above the price of ₹10,000 will fall under a higher tax bracket of 28%.
Other revisions
GoM proposed several changes to GST rates in October too
In its last meeting in October, the GoM proposed several changes to GST rates: Reduced rates: Packaged drinking water (20 liters and above) from 18% to 5%. Bicycles costing less than ₹10,000 from 12% to 5%. Exercise notebooks from 12% to 5%. Increased rates: Shoes costing above ₹15,000 per pair from 18% to 28%. Wristwatches above ₹25,000 from 18% to 28%.
Decision pending
GST Council to decide on proposed rate changes
The GoM will present these proposed rate changes for 148 items before the GST Council on December 21. The final call on the GST rates will be taken by this council, chaired by the Union Finance Minister Nirmala Sitharaman. The council will also decide if there's further scope for rate rationalization and may choose to keep the GoM for periodic reviews.