Cigarettes, tobacco, and aerated drinks to get costlier in India—know reasons behind the price hike

The Group of Ministers (GoM) on Goods and Services Tax (GST) rationalisation on Monday decided to increase tax on products such as cigarettes, tobacco, and aerated beverages by 35 per cent, according to a report by news agency PTI.?

Presently the tax on these products is 28 percent. The decision to increase the tax by 7 per cent is believed to be a part of an increased effort to adjust the tax rates on particular goods to boost revenue collection.?

List of products whose tax has been adjusted?

The Group of Ministers (GoM), led by the Bihar Deputy Chief Minister Samrat Choudhary, met on Monday to fix the proposed rate adjustments. Apart from the increasing tax on ‘sin products’ such as cigarettes, tobacco, and aerated beverages, tax on apparel and other items was also discussed during the rate rationalisation. The clothing included:?

Readymade garments:

Garments with costs up to Rs 1,500 will now be taxed at 5 per cent, while the cost of garments costing between Rs 1,500 and Rs 10,000 will be taxed at 18 per cent, and clothes costing above Rs 10,000 will be taxed at 28 per cent.?

Why did GoM propose new tax changes??

For the restructured tax changes, 148 items are included in total. It has been proposed with the expectation that the new adjustments will have a positive impact on the revenue. Now the GoM's report will be presented to the GST Council on December 21, 2024.?

According to an official quoted by PTI, "The existing four-tier tax structure of 5%, 12%, 18%, and 28% will remain, with the addition of the new 35% rate."

Tax on essential items and services?

Under the GST system, the taxes on essential items are either removed or put on the lowest slab, while on the other hand, the luxury or demerit products are taxed at higher rates. Luxury goods include cars and washing machines, while demerit goods include aerated beverages and tobacco products.?

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