The Group of Ministers (GoM) on GST rate rationalization has recommended increasing the GST rate on tobacco and aerated beverages to 35%. Currently, tobacco products are taxed at 28% GST, along with a compensation cess ranging from 11% to 290%, making them one of the most heavily taxed items in the GST framework. Tobacco leaves are an exception, taxed at 5% under the reverse charge mechanism.
Aerated beverages, irrespective of their sugar or fruit content, are presently taxed at 28% GST, with an additional 12% compensation cess. The proposed changes, if approved, would further increase the tax burden on these items.
The recommendations, made under the chairmanship of Bihar Deputy Chief Minister Samrat Choudhary, will be deliberated upon in the upcoming GST Council meeting scheduled in Jaisalmer on December 21. The six-member GoM also includes finance and revenue ministers from states like Uttar Pradesh, Rajasthan, Karnataka, West Bengal, and Kerala.
In addition to tobacco and aerated drinks, the GoM is also reviewing tax slabs for a variety of goods, including luxury items such as handbags, watches, and cosmetics, and essential goods like bottled water and bicycles. The panel aims to align tax rates with product value, ensuring high-value goods attract higher GST rates while reducing levies on daily-use items.
Sources also revealed that the GoM is considering lowering the GST on health and life insurance premiums, currently taxed at 18%, to make these essential services more affordable. These proposals reflect broader efforts to reform GST structures and promote equity in taxation.
