GST revamp: Which goods and services will now fall under 40% 'sin' tax

Tobacco and related products will continue under the existing cess regime until the Centre clears Covid-era compensation loans to states

 The Goods and Services Tax (GST) Council on Wednesday fixed a special 40 per cent levy on so-called ‘sin goods’ such as pan masala, tobacco, aerated drinks and luxury vehicles, while moving the rest of the system to a simplified two-rate structure.

 

Under the new system, the GST will do away with multiple slabs of 5 per cent, 12 per cent, 18 per cent and 28 per cent, moving instead to a two-slab framework — a merit rate of 5 per cent and a standard rate of 18 per cent.

 

Special rate of 40% on pan masala, tobacco and beverages 

 

Sin goods are typically high-end or unhealthy products taxed heavily to generate revenue and curb consumption. A special 40 per cent levy has been fixed for sin goods such as:

 

-Motorcycles above 350cc

 

-Cars with engine capacity above 1200cc or length over 4000 mm

 

-Private jets, aircraft

 

-Aerated water

 

-Other non-alcoholic beverages

 

-Fruit-based carbonated drinks and fruit juice drinks

 

-Caffeinated beverages

 

-Pan masala

 

-Tobacco related products such as cigars, cheroots, cigarillos, cigarettes

 

-Other manufactured tobacco products (including homogenised/reconstituted, extracts, essences)

 

-Tobacco/nicotine products for inhalation without combustion

 

-Unmanufactured tobacco 

Besides this, admission to casinos, race clubs and sporting events like the Indian Premier League, yachts, as well as betting, gambling, horse racing, lottery and online money gaming will attract the 40% sin tax. The use of rental or leasing services will also be charged under the special rate.   

 

Cess on tobacco products to continue

 

The changes in GST rates of all goods except pan masala, gutkha, cigarettes, chewing tobacco products, unmanufactured tobacco, and bidi will be applicable from September 22, the first day of Navratri. According to Finance Minister Nirmala Sitharaman, these items will remain under the current structure with an additional cess until the government repays the borrowing undertaken during the Covid-19 pandemic to compensate states for revenue shortfall.

 

While the minister did not mention an exact timeline, she indicated the repayment would be completed “well within this calendar year”. The GST Council has authorised her to stop cess collection once the loan is repaid.

 

States raise revenue concerns

 

Several states, particularly those governed by opposition parties, warned that the abolition of the 12 per cent and 28 per cent slabs could substantially reduce their revenues. They urged that any rationalisation must be accompanied by a clear mechanism to compensate states.