new gst tax slab change 12 28 percent removed 40-percent sin luxury goods list price hike

GST 2.0: The GST Council, in its meeting on September 3, approved the abolition of two GST slabs: 12 per cent and 28 per cent. Consumers are happy with the GST 2.0 Diwali gift, as the prices of many goods and products will go down after its implementation. In contrast, the Council has also approved a 40 per cent tax rate for sin and luxury goods, up from the current 28 per cent, with effect from September 22, 2025.

Take a quick look at items set to become more expensive

Items which were earlier taxed at 28 per cent, such as harmful or luxury items like tobacco, sugary drinks, processed junk foods, and expensive vehicles, etc. have been increased to a 40 per cent tax slab.

• Tobacco products such as cigarettes, cigars, cheroots, cigarillos, gutkha, chewing tobacco (such as zarda), unmanufactured tobacco, beedis, scented tobacco and pan masala will be taxed at 40 per cent.
• The new tax slab of 40 per cent will apply to luxury cars as well, with engines above 1200 cc for petrol and 1500 cc for diesel.
• Sugary, flavoured, and carbonated beverages will also be taxed at 40 per cent under this new tax slab.
• Processed junk foods such as Nestle, Prataap Snacks, etc will also be taxed at 40 per cent.

What is a sin tax?

Sin taxes are excise duties on harmful or socially costly goods to discourage their use, while generating additional revenue for public welfare.

However, the government has announced that the tax rate on tobacco products will remain at 28 per cent and cess till the Compensation Cess loans is paid, after which they will be put in the 40 per cent slab.

Alcohol remains outside GST's ambit and continues to be taxed separately by states through excise duties.

ITC Ltd, which makes 80 per cent of its profits from cigarettes, could face risks from the tax hike but could benefit from reduced uncertainty regarding regulatory changes, according to analysts. Moreover, despite the increase in slabs, the total tax burden on tobacco will remain unchanged at 88 per cent, including GST and cess.

With IANS inputs