GST Hike Alert: Tobacco, Aerated Drinks to Cost More with Proposed 35% Rate!

New Delhi(The Uttam Hindu):The Group of Ministers (GoM) on GST rate rationalization, led by Bihar Deputy Chief Minister Samrat Choudhary, has proposed increasing the tax rate on aerated beverages, cigarettes, and other tobacco products from 28% to 35%, according to a PTI report. The proposal aims to enhance revenue collection and adjust the GST structure on specific goods.

GST Rate Adjustments Under Review

The GoM convened on Monday to finalize the proposed changes. In addition to raising taxes on so-called "sin goods," the group also discussed modifications to the GST rates for apparel and other items. The proposed rates for readymade garments are as follows:

>Costing up to ₹1,500: Taxed at 5%.

>Between ₹1,500 and ₹10,000: Taxed at 18%.

>Above ₹10,000: Taxed at 28%.

In total, the GoM has suggested rate adjustments for 148 items, expecting these changes to positively impact revenue.

The GoM's proposals will be presented to the GST Council on December 21, 2024. The council, chaired by the Union Finance Minister and comprising state finance ministers, will take the final decision on the recommendations.

Proposed 35% GST Rate

As part of its recommendations, the GoM has suggested introducing a new 35% GST rate for tobacco products and aerated beverages, while retaining the existing four-tier tax structure of 5%, 12%, 18%, and 28%. According to officials quoted by PTI, this adjustment aligns with the government’s strategy to tax luxury and demerit goods at higher rates.

Current GST Structure

Under the existing GST framework:

>Essential goods are either exempt or taxed at the lowest slab.

>Luxury and demerit goods are taxed at higher slabs.

>Items like aerated beverages and tobacco attract an additional cess over the highest slab of 28%.

The GoM’s recommendations aim to assess the potential for further rate rationalization and may also lead to extending the group's mandate for periodic GST reviews.

Key Proposals from Previous GoM Meetings

In its October meeting, the GoM made several other rate-related suggestions:

>Packaged Drinking Water (20L and above): GST reduction from 18% to 5%.

>Bicycles under ₹10,000: GST reduction from 12% to 5%.

>Exercise Notebooks: GST reduction from 12% to 5%.

>Shoes above ₹15,000 per pair: GST increase from 18% to 28%.

>Wristwatches above ₹25,000: GST increase from 18% to 28%.

These proposed adjustments reflect the government’s effort to balance revenue generation and consumer affordability.