GST Hike on Tobacco, Aerated Beverages: New 35% Slab Proposed
The Group of Ministers (GoM) has recommended increasing the GST on cigarettes, tobacco, and aerated beverages from 28% to 35%, marking the introduction of a fifth GST slab. This move aims to boost revenue and curb the consumption of demerit goods. The proposal, led by Bihar Deputy Chief Minister Samrat Chaudhary, will be presented to the GST Council on December 21, 2024.
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Proposed GST Changes
New 35% Slab
- Applicable to tobacco products, cigarettes, and aerated beverages.
Apparel
- Below ₹1,500: No change (5% GST).
- ₹1,500 to ₹10,000: Hiked to 18%.
- Above ₹10,000: Increased to 28%.
Other Key Changes (October 2024 Proposal)
- Packaged drinking water (20+ litres): Reduced to 5% (from 18%).
- Bicycles under ₹10,000: Reduced to 5% (from 12%).
- Shoes over ₹15,000: Increased to 28% (from 18%).
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Impact Analysis
1. Revenue Boost: Higher tax on luxury and demerit goods is expected to enhance the government's fiscal position.
2. Consumer Behavior: Likely to discourage consumption of products like tobacco and sugary beverages.
3. Business Impact: Industries producing demerit goods may face reduced demand, while affordable goods manufacturers could benefit.
Next Steps
The GST Council will review and finalize these proposals in its December 21 meeting. The council may also retain the GoM for periodic rate rationalization, ensuring alignment with fiscal and socio-economic objectives.
This hike reflects the government’s commitment to balancing revenue generation with public welfare, making it a key development in India’s tax policy landscape.
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