GST on cigarettes, tobacco may increase to 35%, decision on December 21

Delhi Delhi. The Group of Ministers on rationalisation of GST rates on Monday decided to increase the tax on harmful products like aerated beverages, cigarettes, tobacco and related products from the current 28 per cent to 35 per cent. The Group of Ministers (GoM) on rationalisation of rates, headed by Bihar Deputy Chief Minister Samrat Choudhary, also decided to rationalise tax rates on apparels. As per the decision, readymade garments priced up to Rs 1,500 will attract 5 per cent GST, garments priced between Rs 1,500 and Rs 10,000 will attract 18 per cent GST. Garments priced above Rs 10,000 will attract 28 per cent tax. Overall, the Group of Ministers on rationalisation of rates will propose changes in tax rates on 148 items to the GST Council. “The net revenue impact will be positive,” an official said. The GoM report is expected to be discussed in the GST Council, headed by the Union Finance Minister, on December 21 and will be attended by his state counterparts. The final decision on GST rate changes will be taken by the Council. “The GoM has agreed to propose a special rate of 35 per cent on tobacco and related products and aerated beverages. The four-tier tax slabs of 5, 12, 18 and 28 per cent will continue and a new rate of 35 per cent has been proposed by the GoM,” the official said.

Currently, GST is a four-tier tax structure with slabs of 5, 12, 18 and 28 per cent. Under GST, essential goods are either exempted or taxed at the lowest slab, while luxury and demerit goods attract the highest slab. Luxury goods like cars, washing machines and demerit goods like aerated water and tobacco products attract cess over and above the highest slab of 28 per cent, the official said. The Group of Ministers on rationalisation of rates on Monday finalised its report, which will be presented to the Council. The council will now decide if there is further scope for rationalising the rates and may decide to continue the group so that the rationalisation process continues over time, the official said. In its last meeting in October, the group of ministers had proposed reducing the GST on packaged drinking water of 20 litres and above from 18 per cent to 5 per cent. It also decided to propose to the council a reduction in GST on bicycles priced below Rs 10,000 from 12 per cent to 5 per cent. Also, GST on exercise notebooks will be reduced from 12 per cent to 5 per cent. The group of ministers also proposed raising the GST on shoes priced above Rs 15,000 per pair from 18 per cent to 28 per cent.