The Bills enabling taxes on sin goods build on GST rate rationalisation, which moved the system to two slabs and set sin and luxury goods at a 40% rate
With the GST compensation cess ending after debt repayment, the Bills aim to prevent revenue loss from sin goods in the transition period
One Bill raises excise duty on tobacco once the cess ends, while another allows a health and security cess on machines producing notified items
Cess revenue is not shared with states, increasing worries about reduced divisible tax flows. A sin tax within GST would have kept the structure simpler
Net GST collection grew just 1.3% in November. Festival demand lifted receipts, but weak trends could affect Union and state finances ahead
With revenue growth still soft, any decline in GST may strain budgets. The GST Council may need further rate tweaks to protect long-term revenue