New Delhi: The Group of Ministers (GoM) on GST rate rationalization has proposed a significant increase in taxes on sin goods, including cigarettes, tobacco, and aerated beverages, raising the rate from 28% to 35%. This recommendation comes as part of a broader effort to rationalize tax rates and boost revenue.
The GoM, chaired by Bihar Deputy Chief Minister Samrat Chaudhary, also suggested changes to the tax structure for apparel. Under the new proposal:
- Readymade garments priced up to ₹1,500 will attract 5% GST.
- Garments priced between ₹1,500 and ₹10,000 will fall under the 18% GST slab.
- Those costing above ₹10,000 will be taxed at 28%.
In total, the GoM plans to recommend GST rate adjustments on 148 items, which are expected to have a positive impact on net revenue. The report will be presented to the GST Council, chaired by Union Finance Minister Nirmala Sitharaman, for discussion on December 21.
Key Highlights from the GoM Proposal:
- Sin Goods: Tobacco, cigarettes, and aerated beverages proposed to be taxed at 35%.
- Luxury Goods: Shoes priced above ₹15,000 and wristwatches costing over ₹25,000 could see GST increase from 18% to 28%.
- Essential Goods: A proposed reduction in GST for packaged drinking water (20 liters and above) from 18% to 5%.
- Bicycles: Those costing less than ₹10,000 may see a GST reduction from 12% to 5%.
- Exercise Notebooks: GST reduction from 12% to 5%.
Currently, GST follows a four-tier structure of 5%, 12%, 18%, and 28%. Essential goods are either exempt or fall under the lowest slab, while luxury and demerit items face the highest rate, often with an additional cess.
The GoM report also leaves room for periodic reviews of tax rates as part of an ongoing rationalization exercise.
What’s Next?
The GST Council will review the GoM’s recommendations during its upcoming meeting. A final decision on rate changes will depend on council deliberations, with potential implications for consumers and industries across various sectors.
