The Group of Ministers (GoM) on GST rate rationalisation has agreed upon recommendations to hike tax rates on a number of categories of products including sin goods like aerated drinks, cigarettes, and tobacco. These proposals, which will be taken up by the GST Council on December 21, would majorly change the current framework of GST, officials confirmed today.

The GoM, headed by Bihar Deputy Chief Minister Samrat Chaudhary, has recommended increasing the tax rate on sin goods to 35%, from the existing 28%. This includes items like aerated beverages and tobacco products.“The GoM has agreed to propose a special rate of 35 percent on tobacco and related products and aerated beverages,” said an official.

The rates for ready-made garments too have been proposed to be rationalised. The new rates will be: 

Up to ₹1,500 Garments: 5% GST

Between ₹1,500 and ₹10,000 Garments: 18% GST

Above ₹10,000 Garments: 28% GST

This would make GST collection more efficient as tax rates will fall in line with price bands.

Proposals cover 148 items

The GoM has identified 148 items in all for tax rate adjustments. “The net revenue impact will be positive,” an official stated, hinting at an anticipated increase in GST collections.

Present GST structure and new proposals

The present GST structure is, therefore, a four-tier slab-based system of taxation with 5%, 12%, 18%, and 28% slabs. Luxury and sin goods have the highest tax rates, and essential goods either exempt or taxed at the lowest rates. Sin goods include tobacco, while luxury items are cars and washing machines, apart from those already bearing an added cess.

The GoM's suggestion provides a new 35% slab for some sin goods and retains a four-tier structure for other items.

The GST Council, composed of the Union Finance Minister and counterparts from the states, would take the final decision in this regard. The discussion is also going to decide whether the GoM's mandate will continue for the future rationalization exercise.

Important points from earlier meetings

In its October meeting, the GoM had suggested several changes in rates, including

Lower the GST on packaged drinking water, (20 liters and above), from 18% to 5%.

Decrease GST on bicycles under ₹10,000 from 12% to 5%.

Lower the GST on exercise notebooks from 12% to 5%.

Increase GST on shoes above ₹15,000 from 18% to 28%.

Raise GST on wristwatches above ₹25,000 from 18% to 28%.

With the GoM’s report finalised, the GST Council’s December meeting will be pivotal in shaping India’s indirect tax structure.