The Group of Ministers (GoM) on Goods and Services Tax (GST) rate rationalisation has recommended a new 35% tax slab for tobacco products and aerated beverages, sources revealed. This proposal aims to streamline tax rates and address revenue concerns.
Current Taxation Framework
Presently, tobacco products are taxed at 28% GST, with an additional compensation cess ranging from 11% to 290%, depending on the product. Aerated drinks also fall under the 28% GST bracket, accompanied by a 12% compensation cess. These items are classified as ‘sin goods’ due to health implications, attracting higher tax rates.
Implications of the Proposed Tax Rate
The suggested 35% GST rate would replace the existing 28% GST and the associated cesses, leading to a more straightforward tax structure. However, this change could result in higher consumer prices for tobacco and aerated drinks, potentially impacting sales and consumption patterns.
Industry Response
Industry stakeholders have expressed concerns over the proposed tax hike. The Indian Beverage Association (IBA), representing major soft drink manufacturers, argues that such high taxes are discriminatory compared to other sugar-based products like ice cream and chocolates, which are taxed at lower rates.
Next Steps
The GST Council, chaired by Finance Minister Nirmala Sitharaman, is expected to deliberate on this recommendation in its upcoming meeting on December 21 in Jaisalmer. The council will consider the potential economic and health impacts before making a final decision.
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