Tue Dec 03 06:49:08 UTC 2024: **India Proposes GST Overhaul: Sin Tax Hike, Rate Tweaks for Garments**
JAISALMER, INDIA – A major restructuring of India’s Goods and Services Tax (GST) is on the horizon, with a proposal to introduce a 35% special rate for “sin goods” like aerated drinks and tobacco products. This recommendation, finalized by a Group of Ministers (GoM) on Monday, aims to offset revenue losses from planned rate cuts on other items.
The current four-tiered GST structure (5%, 12%, 18%, and 28%) will remain in place for the medium term, according to a state finance minister. However, the GoM’s report proposes several significant changes, including:
* **Sin Goods Tax Hike:** A new 35% GST rate for aerated drinks, cigarettes, tobacco, and related products, up from the current 28% maximum.
* **Readymade Garment Rates:** A tiered system for readymade garments, with 5% GST on those priced up to ₹1,500, 18% on garments priced between ₹1,500 and ₹10,000, and 28% for garments costing over ₹10,000.
* **Luxury Item Hikes:** Increased GST rates on other high-end items such as cosmetics, watches, and shoes.
The GoM also suggested potential changes to GST on insurance premiums. Premiums for senior citizen health insurance and term life insurance are likely to be exempted, while health insurance coverage up to ₹5 lakh might also be exempted. Policies exceeding ₹5 lakh could remain subject to the existing 18% GST rate.
Rate cuts are also proposed for certain items, including packaged water (over 20 liters), bicycles (under ₹10,000), and exercise notebooks. Conversely, shoes costing over ₹15,000 and wristwatches over ₹25,000 may move to the 28% slab.
The proposals will be considered by the GST Council at its meeting in Jaisalmer on December 21st. A separate GoM is seeking a six-month extension to submit its report on the future of the compensation cess, currently levied on sin and luxury goods. The cess, originally intended to compensate states for GST revenue losses, is set to expire in March 2026.
First Piper 