Under the ‘Next-Gen GST’ system, the Centre has proposed to reduce the existing 4 tax slabs to just 2. Once the GST Council approves the proposal, the new rates will come into effect. Prime Minister Narendra Modi has indicated that the new GST structure could be implemented from Diwali. Instead of the current 5%, 12%, 18% and 28% slabs, only 5% and 18% tax slabs have been suggested.
However, there will also be a special category for Sin Goods, which may attract a heavy GST. As per government sources, Sin Goods could be taxed at 40%.
Cigarette pack of ₹256 may cost ₹280
Cigarettes, tobacco, gutkha, pan masala and other tobacco products fall under the Sin Goods category. After Diwali, these will attract 40% GST. Currently, these products are taxed at 28% GST. With the proposed change, a cigarette pack costing ₹256 may rise to ₹280. Similarly, gutkha, pan masala, and other tobacco items will also become more expensive.
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A formula to balance revenue?
At present, cigarettes and other tobacco products attract not just 28% GST but also compensation cess and other levies. Products under the Sin Goods category face multiple taxes, including excise duty, compensation cess, and NCCD (National Calamity Contingent Duty). This raises the total indirect tax burden on tobacco products to around 53%.
The compensation cess on Sin Goods is scheduled to end on 31 March 2026. By introducing a 40% GST, the government can maintain revenue collection from tobacco products. For reference, in the financial year 2022–23, the government collected ₹72,788 crore in revenue from the sale of tobacco products.