The Group of Ministers (GoM) on GST rate rationalisation has suggested raising the tax on items like aerated drinks, cigarettes, and other tobacco products to 35%, higher than the existing 28%, according to news agency PTI. This choice could be a component of a larger initiative to modify tax rates on specific items to improve revenue generation.
The GoM, chaired by Bihar’s Deputy Chief Minister Samrat Choudhary, convened on Monday to finalize the suggested rate changes. In addition to the increase in “sin goods,” modifications to the GST framework for clothing and various other products were also addressed.
Readymade Garments:
Costing as much as Rs 1,500: Subject to a 5% tax.
From Rs 1,500 to Rs 10,000: Taxed at 18%.
Above ₹10,000: Taxed at 28%.
The GoM has suggested tax modifications for a total of 148 items, anticipating that these changes will positively affect revenue.
The report from the GoM is scheduled to be submitted to the GST Council on December 21, 2024. The council, led by the Union Finance Minister and comprising state finance ministers, will ultimately decide on the suggested modifications.
“The GoM has consented to suggest a specific rate of 35% on tobacco and associated items as well as carbonated drinks.” “The current four-tier tax system of 5%, 12%, 18%, and 28% will continue, along with the introduction of the new 35% rate,” an official stated as reported by PTI.
Current GST Structure
Under the GST system, essential items are either exempt or taxed at the lowest slab, while luxury and demerit goods are taxed at higher rates. Luxury goods, such as cars and washing machines, and demerit goods, including aerated beverages and tobacco products, also attract a cess in addition to the highest slab rate of 28%.
The GoM’s recommendations will help the council assess whether there is further scope for rate rationalisation. The council may also decide to extend the GoM’s mandate for periodic reviews of GST rates.
Earlier GOM Proposals
In its last meeting in October, the GoM made several other rate-related suggestions:
Packaged Drinking Water (20 litres and above): Reduce GST from 18% to 5%.
Bicycles costing less than Rs 10,000: Reduce GST from 12% to 5%.
Exercise Notebooks: Reduce GST from 12% to 5%.
Shoes costing above Rs 15,000 per pair: Increase GST from 18% to 28%.
Wristwatches above Rs 25,000: Increase GST from 18% to 28%.
