Tue Dec 03 09:52:08 UTC 2024: ## GST Overhaul Proposed: Sin Taxes Up, New Rate Introduced
**Jaisalmer, India** – A significant restructuring of India’s Goods and Services Tax (GST) is on the horizon. A Group of Ministers (GoM) has recommended a major overhaul of tax rates, including a new 35% tax on “sin goods” such as aerated drinks and tobacco products. This marks the first major GST rate revision since the tax’s implementation seven years ago.
The GoM, chaired by Bihar Deputy Chief Minister Samrat Choudhary, proposed the changes after a Monday meeting. Currently, cigarettes are taxed at 28% plus a compensation cess, while aerated drinks fall under the 28% bracket. The new 35% rate would apply to both. This increase has already caused shares in cigarette companies like ITC, Godfrey Phillips, and VST Industries to drop. Similarly, Varun Beverages, a major PepsiCo bottler, saw its shares fall by as much as 5.2%.
The proposed changes are not limited to “sin goods.” The GoM also suggested a tiered system for ready-made garments, with rates varying from 5% for garments under Rs 1,500 to 28% for those above Rs 10,000. Higher GST rates are also recommended for luxury items such as cosmetics, watches, and shoes.
The GoM’s recommendations, affecting 148 items in total, are projected to result in a net positive revenue impact for the government. The proposals will be reviewed by the GST Council, headed by Finance Minister Nirmala Sitharaman, on December 21st in Jaisalmer. The Council will then make the final decision. The meeting will also consider proposals to exempt senior citizens from health insurance premiums and provide GST exemptions on health insurance up to Rs 5 lakh for others.
While the GoM aims to rationalize the GST structure, concerns remain about the impact on certain sectors. Reports indicate that the high taxation of carbonated soft drinks has already hampered the growth of India’s CSD sector. The GoM’s work may also lead to periodic GST rate reviews in the future.
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