In a landmark decision, the GST Council has approved a uniform 40% consumption tax on sin goods, replacing the earlier 28% GST slab plus cess mechanism. The move is being seen as a significant step in the GST 2.0 reforms agenda aimed at simplifying the indirect tax regime.
What are sin goods under GST?
Sin goods are products considered harmful to health or society, and they have traditionally attracted the highest tax slabs. These include tobacco, cigarettes, pan masala, gutka, luxury and SUV cars, online gambling and gaming, caffeinated or aerated drinks, coal, lignite, and peat.
Previously, these goods were taxed at 28% GST plus a variable compensation cess. For example, chewing tobacco carried a 96% cess, while luxury cars and aerated beverages attracted steep additional levies.
Why the change matters
By merging GST and cess into a single 40% consumption tax, the Council aims to:
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Simplify compliance by removing multiple levies.
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Curb consumption of harmful products.
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Boost revenue for both the Centre and states under a transparent system.
The Finance Ministry noted that the new structure is intended to balance revenue needs with public health concerns, while ensuring a uniform framework across states.
The decision is expected to have a direct impact on industries dealing in these products, while consumers may see sharper price increases on tobacco, luxury vehicles, and aerated drinks once the tax change takes effect.
