The Group of Ministers (GoM) has proposed increasing the GST on tobacco and aerated drinks to 35% from the current 28%. This is part of broader tax rate adjustments aimed at boosting revenue. The GST Council will review these proposals on December 21, 2024, to finalize changes.
Proposed Changes to GST Rates
The GoM, led by Bihar Deputy Chief Minister Samrat Choudhary, has recommended raising GST on “sin goods” like tobacco and aerated beverages to 35%. Currently, these items fall under the highest tax slab of 28%, which includes an additional cess.
In addition to this increase, the GoM has discussed tax adjustments for other categories, including apparel and over 148 other items. Proposed rates for readymade garments, for instance, vary by cost:
- Up to Rs 1,500: 5% GST
- Rs 1,500 to Rs 10,000: 18% GST
- Above Rs 10,000: 28% GST
These recommendations will be evaluated by the GST Council during its December meeting.
Existing GST Framework
The GST structure comprises four tax slabs: 5%, 12%, 18%, and 28%, with essential items taxed at lower rates and luxury or demerit goods at higher rates. Goods like cars, washing machines, and “sin goods” such as tobacco also attract an additional cess.
The proposed introduction of a 35% slab for specific demerit goods aligns with efforts to rationalize rates while boosting revenue collection.
Previous Recommendations by the GoM
Earlier this year, the GoM suggested several other rate changes:
- Reducing GST on packaged drinking water (20L and above) to 5% from 18%
- Lowering GST on bicycles costing less than Rs 10,000 to 5%
- Increasing GST on shoes priced above Rs 15,000 and wristwatches over Rs 25,000 to 28%
These adjustments aim to refine the GST framework for better compliance and revenue optimization.
Next Steps
The GST Council, headed by the Union Finance Minister, will make the final decision on these recommendations. The council may also extend the GoM’s mandate to periodically review GST rates and assess opportunities for further rationalization.
