Get ready to pay 35% GST on these products!

The Group of Ministers (GoM) on GST rate rationalisation has proposed a significant increase in the tax on aerated beverages, cigarettes, and other tobacco-related items, recommending a hike from the current 28% to 35%. The proposal, reportedly part of an effort to optimise revenue collection, was discussed during a GoM meeting chaired by Bihar Deputy Chief Minister Samrat Choudhary on Monday.

The GoM also explored restructuring GST rates for apparel and other goods. Under the proposed tax structure for apparel:

• Items costing up to ₹1,500 will attract a 5% GST.
• Those priced between ₹1,500 and ₹10,000 will be taxed at 18%.
• Items exceeding ₹10,000 will fall under the 28% bracket.

A total of 148 items are under consideration for revised GST rates. Officials believe the proposed changes could positively impact revenue collection while maintaining essential goods in the lower tax brackets.

"The GoM has agreed to propose a special rate of 35% on tobacco products and aerated beverages. The existing four-tier structure of 5%, 12%, 18%, and 28% will remain, with the addition of the new rate," said an official familiar with the matter.

The GoM's recommendations will be presented to the GST Council on December 21, 2024. Chaired by the Union Finance Minister and comprising state finance ministers, the council will review and decide on implementing these changes.

Luxury goods and demerit items already attract a 28% GST rate plus a cess. With the proposed new slab, the government aims to strengthen revenue collection while maintaining exemptions and lower rates for essential goods.

The recommendations also include a mandate for periodic reviews of GST rates. If approved, this could lead to further rationalisation of the tax structure in the future, ensuring it adapts to evolving economic conditions.