The Group of Ministers (GoM) on GST rate rationalisation on Monday decided to hike tax on sin goods like aerated beverages, cigarettes, tobacco, and related products to 35 percent from the present 28 percent, an official said.
As per the decision by GoM on rate rationalisation under Bihar Deputy Chief Minister Samrat Chaudhary, readymade garments costing up to Rs 1,500 would attract 5 percent GST, and those between Rs 1,500 and Rs 10,000 would attract 18 percent. Garments costing above Rs 10,000 would attract a 28 percent tax.
The GoM on rate rationalisation will propose tax rate tweaks on 148 items to the GST Council in total. "The net revenue impact will be positive," an official said.
The report is expected to be discussed by the GST Council—chaired by Union Finance Minister and comprising her state counterparts—on December 21. A final decision on GST rate changes will be taken by the council.
"The GoM has agreed to propose a special rate of 35 percent on tobacco and related products and aerated beverages. The four-tier tax slab of 5, 12, 18, and 28 percent will continue, and a new rate of 35 percent is proposed by the GoM," said the official.
Currently, GST is a four-tier tax structure with slabs at 5, 12, 18, and 28 percent.
Under GST, essential items are either exempted or taxed at the lowest slab, while luxury and demerit items attract the highest slab. Luxury goods like cars and washing machines, and demerit goods like aerated water and tobacco products, attract cess on top of the highest 28 percent slab.
The official said the GoM on rate rationalisation has finalised its report on Monday to be presented before the council.
The council will now decide whether there is further scope for rate rationalisation and may decide to retain the GoM so that the rationalisation exercise continues periodically, the official added.
In its last meeting in October, the GoM had proposed reducing GST on packaged drinking water of 20 litres and above to 5 percent from 18 percent.
It had also decided to propose to the council to reduce GST on bicycles costing less than Rs 10,000 to 5 percent, from 12 percent.
Also, GST on exercise notebooks would be reduced to 5 percent from 12 percent. The GoM also proposed hiking GST on shoes above Rs 15,000/pair from 18 percent to 28 percent.
GoM also proposed hiking GST on wristwatches above Rs 25,000 from 18 percent to 28 percent in the previous meeting on October 19.