GST Council Considers Steep 35% Hike On Cigarettes, Tobacco Products

The GST Council, chaired by Union Finance Minister and comprising state finance ministers, is scheduled to discuss the GoM report on December 21

The Group of Ministers (GoM) on Goods and Services Tax (GST) rate rationalisation has proposed significant changes to tax rates, including a hike on sin goods like aerated beverages, cigarettes, and tobacco products, increasing the tax to 35 per cent from the current 28 per cent . The decision was taken during a meeting on Monday, chaired by Bihar Deputy Chief Minister Samrat Chaudhary.

In addition to sin goods, the GoM has suggested rationalising GST rates for apparel. Under the proposed structure:

Readymade garments costing up to Rs 1,500 will attract 5 per cent GST.

Garments priced between Rs 1,500 and Rs 10,000 will be taxed at 18 per cent .

Those costing above Rs 10,000 will face a 28 per cent GST rate.

The GoM has outlined rate adjustments for 148 items in its report, which will be presented to the GST Council. An official stated that these changes are expected to have a positive net revenue impact.

Key Proposals Await GST Council Approval

The GST Council, chaired by Union Finance Minister and comprising state finance ministers, is scheduled to discuss the GoM report on December 21. The final decision on rate changes will be taken during the meeting.

"The GoM has proposed a new 35 per cent tax rate for specific sin goods, while the four existing GST slabs — 5 per cent , 12 per cent , 18 per cent , and 28 per cent — will remain unchanged," an official said.

Currently, essential items are either exempt from GST or taxed at the lowest rates, while luxury and demerit goods fall under the highest slab and may attract additional cess.

Previous Recommendations

In its October meeting, the GoM had proposed several other changes, including:

Reducing GST on packaged drinking water (20 liters and above) from 18 per cent to 5 per cent .

Lowering GST on bicycles costing under Rs 10,000 from 12 per cent to 5 per cent .

Reducing GST on exercise notebooks from 12 per cent to 5 per cent .

Increasing GST on shoes priced above Rs 15,000 per pair and wristwatches costing over Rs 25,000 from 18 per cent to 28 per cent .

These proposals aim to streamline the tax structure and address revenue generation while keeping affordability in mind for certain essential items.

The GST Council is also expected to decide whether the GoM's rate rationalisation work will continue periodically to identify further scope for adjustments.