The government has recently made changes in GST rates under GST 2.0 reforms which will be implemented from 22 September. Under the GST reform, the government has imposed heavy tax on tobacco products like cigarettes, let us know that now the slabs of GST have been increased to 40% on cigarette, gutkha, paan masala and other tobacco products. Earlier, cigarettes used to levy 28% GST. While GST does not look at alcohol at all. In such a situation, the question arises that why is this difference and what rules work behind it?
Why doesn’t GST look on alcohol?
Talking about alcohol, it is completely out of the scope of GST. This means that GST does not look on alcohol. It is kept separate from the GST law. Each state has its own separate excise duty and tax system which applies to alcohol. One reason for this is that the state governments have the right to tax and collection on liquor. If the GST was implemented, the tax income of the state governments would be affected, so it has been excluded.
Petroleum products also out of GST
Apart from alcohol, some petroleum products like petrol, diesel, crude oil, natural gas and aviation fuel are currently outside the GST. VAT and other taxes are also applied to these products. The Central Government Excise Duty and State Governments put VAT on petrol and diesel, which gives both these big revenue. If these fuels are brought under the purview of GST, then there may be a huge reduction in the income of governments due to low tax rates. State governments control their tax structure and not only affect prices by applying VAT on petrol and diesel, but also earns big revenue.
Does this mean that tax on alcohol is less?
No, this does not mean that tax on alcohol is less. In fact, in many states, there is heavy excise duty on alcohol, which is a large part of the government’s income. The only difference is that this tax is levied under the old rules of the state government instead of GST.