A panel of state ministers has proposed a new tax rate under Goods and Services Tax for sin goods, according to people in the know. Tobacco products like cigarettes, aerated beverages and luxury cars are categorised as sin goods under the tax regime.
The proposal was floated in the rate rationalisation report finalised to be presented before the GST Council in its upcoming meeting later this month.
Currently, the GST has four-tier tax structure, with items taxed at 5%, 12%, 18% and 28%. Goods like food essentials, vegetables, educational services and healthcare are exempt from the GST. Meanwhile, luxury and demerit goods are taxed at the highest 28% rate, along with an additional cess.
The Group of Ministers on rate rationalisation under Bihar Deputy Chief Minister Samrat Chaudhary has suggested treating sin goods and demerit goods differently under the indirect tax regime, the people cited above told NDTV Profit. At present, both categories attract the highest 28% tax rate under GST.
The panel has also recommended adding more items in the 28% GST bracket. Presently, products ranging from air conditioners to luxury cars and aerated drinks are taxed at 28% under GST.
The ministerial panel has also suggested rate adjustments for about 150 items, including readymade garments.
The move will help decide the future of compensation cess, which ends in March 2026.
A decision on the rate rationalisation proposals is expected to be taken at GST Council meeting on Dec. 21, the people said.
The Central Board of Indirect Taxes & Customs said that the reports on GST rate rationalisation on the basis of GoM deliberations are premature and speculative.
"The GST Council has not yet deliberated on any GST rate changes. The Council has not even received the recommendations of the GoM. In fact the GoM has yet to finalise and present its recommendations to the Council after which the Council will take a final view on the recommendations of the GoM." CBIC said in a statement.
In its last meeting in October, the GoM proposed slashing GST on packaged drinking water bottles of capacity 20 litres and above to 5% from 18%. It had proposed to reduce GST on bicycles under Rs 10,000 to 5% from the current 12%.
The GoM also proposed to cut GST on exercise notebooks to 5% from 12%. Meanwhile, it suggested hiking GST on shoes priced above Rs 15,000 a pair and wrist watches above Rs 25,000 from 18% to 28%.
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