Top GST panel recommends 35% tax rate for cigarettes, tobacco: Reports

The Group of Ministers (GoM) on GST rate rationalization has taken a decision to increase tax from the current 28% to 35% on sin goods like cigarettes, tobacco, aerated beverages, and other related products, an official said on Monday. The GoM under the Deputy Chief Minister of Bihar Samrat Chaudhary also determined to rationalize apparel tax rates.

As the decision suggests, readymade garments costing up to Rs 1500 would be under 5% GST, and those within Rs 1500 to Rs 10000, would be under 18% GST. Garments above the Rs 10000 range will fall under 28% GST.

Overall, the GoM on rate rationalization will bring forward tax rate alterations on 148 items to the GST council. An official said, ‘The net revenue impact will be positive’.

It is expected that the GST council, chaired by the Union Finance Minister and consisting of her state counterparts, will discuss the GoM report on December 21. The council will take a final decision on GST rate changes.

According to the official, ‘The GoM will propose a rate of 35% on aerated beverages, tobacco, and other related items. The four-tier tax slab will continue.

Recently, the structure of GST is of four-tier with slabs at 5, 12, 18, and 28%.

Essential products are taxed at the lowest slab or excluded, and luxury and demerit products fall under the highest slab. Luxury items such as washing machines, and cars, and demerit items such as tobacco products and aerated water are taxed under the highest 28% slab.

The official said the GoM on rate rationalization has completed its final report on Monday to be submitted before the GST council.

It is up to the council now to determine if there is further space for rate rationalization and may choose to retain the GoM for the periodical continuation of the rationalization exercise.

In a meeting in October, the GoM had suggested decreasing GST on 20 liters of packaged drinking water. It has also determined to propose a GST reduction on bicycles ranging below Rs 10000, from 12% to 5%.

GST hike on wristwatches costing more than Rs 25000 to 28% from 18% was also proposed on 19thOctober.