In a major move by the Group of Ministers (GoM), a new 35% Goods and Services Tax (GST) rate has been proposed after around 7 years of its rollout. The GoM in an effort to GST rate rationalisation has proposed increasing the tax on Sin Goods such as Aerated Beverages, Cigarettes, Tobacco and related products. This 35% GST is a 7% hike from the current 28% GST that is being applied on sin goods. The move is in line, likely to adjust tax rates on certain goods to enhance revenue collection.
Tax change for 148 items
The proposed rate adjustment meeting was held on Monday which was led by Bihar deputy Chief Minister Samrat Chaudhary and the report will now be taken to the GST Council on December 21, 2024. The council, chaired by the Union Finance Minister and including state finance ministers, will decide on the proposed changes. Moreover, tax change has been proposed for 148 items including readymade garments, which will be reviewed by the GST Council.
Readymade Garments:
Costing up to Rs 1,500: Taxed at 5%.
Between Rs 1,500 and Rs 10,000: Taxed at 18%.
Above Rs 10,000: Taxed at 28%.
Restructuring of tax rates
The proposed restructuring of tax rates if approved will contribute to the centre’s and State’s revenue which will balance out the loss from rate cuts on other common-use items as said by a state finance minister, who is part of the GoM. A Statement by official reads
“The GoM has agreed to propose a special rate of 35% on tobacco and related products and aerated beverages. The existing four-tier tax structure of 5%, 12%, 18%, and 28% will remain, with the addition of the new 35% rate,”
“It will be a special rate and will help in minimising the revenue loss impact from the other rate changes”
The GoM’s proposal will help the GST Council to make a decision as to whether the tax rate can be adjusted further. The council may also allow GoM to periodically review and suggest changes to GST rates in upcoming days. The last meeting by GoM, that was held in October, proposed several other rate related changes like reducing the GST from 18% to 5% on packaged drinking water (20 liters and above), reducing GST from 12% to 5% on bicycles costing less than rupees 10,000, reducing GST from 12% to 5% on Exercise Notebooks, increasing GST from 18% to 28% for shoes costing above rupees 15,000 per pair and increasing GST from 18% 228% on wrist watches above rupees 25,000. Moreover, GoM has also proposed hiking rates on other high-end items such as cosmetics, watches and shoes now.
