Shocking Move: GoM Proposes 35% GST Hike on Aerated Drinks, Cigarettes & Tobacco – Impact on Businesses and Consumers Revealed
In a significant move to restructure the Goods and Services Tax (GST) seven years after its launch, a special GST rate of 35% is proposed for demerit goods such as aerated beverages, cigarettes, and tobacco products. This proposal comes from the Group of Ministers (GoM) on rate rationalization ahead of the GST Council’s meeting on December 21. The rise from the existing top rate of 28% is designed to offset revenue losses from reduced rates on common-use items.
The current four-slab GST structure of 5%, 12%, 18%, and 28% will remain for the medium term. Among other recommendations, there will be a 5% GST on readymade garments priced up to Rs 1,500, an 18% rate for those between Rs 1,500 to Rs 10,000, and 28% for garments over Rs 10,000.
The GoM, led by Bihar Deputy Chief Minister Samrat Choudhary, suggests shifting high-end items like cosmetics, watches, and shoes to higher tax brackets, aligning taxation more closely with product pricing, affecting luxury goods buyers.
Further discussions are anticipated on GST implementation on health and life insurance premiums, with possible exemptions for senior citizens and health cover up to Rs 5 lakh.
Rate reductions were also proposed on items such as packaged water above 20 liters, bicycles under Rs 10,000, and exercise notebooks. Expensive shoes and wristwatches might see a rate increase to 28%.
A separate GoM on compensation cess is analyzing the potential removal of the cess on luxury goods, which is currently levied above the 28% GST rate. The compensation cess, extending till March 2026, helps repay loans taken to cover revenue losses during the COVID-19 pandemic. The group has requested additional time for a comprehensive review and is expected to report by mid-2023. This move reaffirms efforts to streamline GST and adapt to the evolving economic landscape.
Original Source: https://indianexpress.com/article/business/gom-proposes-hike-in-gst-on-aerated-drinks-cigarettes-tobacco-to-35-per-cent-9702976/
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Publish Date: 2024-12-03 01:15:00
