Kolkata: In the biggest GST reform undertaken since the tax was rolled out in 2017, the Centre reserved a 40% tax rate for a handful of goods considered luxury and “sinful”, which could be considered harmful for health. As announced by the Centre, the new rates will kick in from September 22 2025. The 40% rate is far higher than the 28% in which these items are now taxed.
On the whole, the new GST structure will have two rates 5% and 18% and discontinue the 12% and 28% slabs. Let’s have a look at the list of the sin goods, taxing which the government wants to raise a part of the revenue sacrificed to bring down the overall revenue raised from the huge basket that will generate lower resources for the government henceforth.
The ‘sinful’ list
Tobacco products perhaps occupies the top of the list in terms of usage which the government and health experts want the people to discourage.
Tobacco products: Pan masala, gutkha, cigarettes, chewing tobacco, unmanufactured tobacco, bidi, scented tobacco
Transportation: Certain luxury/selected transport-related goods and services moved from 28% to 40%
Miscellaneous items: Imported/dutiable personal-use articles and other miscellaneous goods shifted from 28% to 40% (specifics in notifications)
Cigars, cheroots, cigarillos, cigarettes: Now 28%; will move to 40%
Sugary and flavoured drinks, caffeinated drinks and energy drinks (aerated waters with added sugar): now 28%; will move to 40%
Luxury and premium cars: 40% (1200 cc plus petrol engines and 1500 cc diesel engines)
A point to remember is that alcohol is not in the ambit of GST. States levy excise duty on this product for their revenues.
Smoking it away
Cigarettes and tobacco have always been in focus of public discourse whenever direct taxation issues come up in India. Reports estimate that cigarette consumption not only tells upon the health of the smoker and those present around him/her, but also wastes a heavy 1% of the country’s GDP. By pushing tobacco and its derivatives to 40%, the government has decided to collect more revenue and indirectly discourage the use of these products — from bidi to gutkha, cigarettes to pan masala.
Cigarettes now attract 28% GST along with a compensation cess. Reports state that this element accounts for anywhere between Rs 2.1 and Rs 4.2 per stick and also an ad valorem duty of 5%. These depend on the length of the stick — the longer the stock, the higher the tax component.