GST Council approves highest tax rate of 40% on these goods
These changes are expected to be released by September 22, 2025. The Council said that tobacco products will continue in the current GST + CESS until the compensation loans are completely discharged and then migrate to 40% signs.
The Council, a summit organ for GST decisions, met on September 3 to conclude the revision. Prime Minister Narendra Modi had already marked reforms during the Independence Day speech and called them the “Diwali gift için for citizens.
Here is a list of everything that has the highest tax plate:
- Tobacco Products: Pan Masala, Gutkha, Cigarette, Chewing Tobacco (Like Dice), Unproducted tobacco, Bidi, Scented Tobacco
- Transportation Sector: Some luxury/selected transportation goods and services have been moved from 28% to 40% (Details to be reported under HSN list)
- Various High Efficiency Products: Imported/Officers Personal Use Articles and various other various goods shifted from 28% to 40% (features to be detailed in notifications)
- Cigar, cheots, cigars and cigarettes: 28% to 40%
- Sugar and flavored beverages (including sugar added ventilated water): 28% to 40%
Sin Tax is a consumption tax applied to goods that are accepted as harmful or socially costly. By increasing the consumption price, these taxes serve a dual purpose: to deterrence the use when generating additional income for public welfare.
In fact, cigarette consumption only evacuates more than 1% of the country’s GDP and encourages the government to receive sin taxes on harmful products. The collected income is usually channeled to welfare programs, strengthening the role of tax in both reducing consumption and supporting social initiatives. Taxes on sin goods are not flexible (as consumers who are dependent on such products continue to buy them despite higher prices), the government expects to see higher income rather than lower consumption.
40 % club and what’s in
“Sin goods” or “demerit goods” are considered harmful to health or society and taxed at the highest rate. Products to be placed under 40 % sheet include:
- Tobacco and related products: cigarettes, cigars, chewing tobacco, gutkha, Pan fairy tale
- Sweeted beverages: carbonated, caffeine drinks and energy drinks
- Luxury vehicles: high -level cars and SUVs
- Junk food: highly processed products in terms of sugar, salt or trans fat
Alcohol remains out of the Ambite of the GST and continues to be taxed separately by the states with consumption duties.
Meanwhile, cigarette is currently a mixture of 28% GST plus compensation team – a mixture of specific and advertising valorem tasks. Specific Cess ranges from RS 2.1 to RS 4.2 per bar due to length with an additional name valorem with an additional ad valorem for 5% (for bars up to 74 mm) and 36% (for 84 mm).
However, according to a meat report, while the plate rises, the total tax load on tobacco will unchanged at 88%by combining GST and CESS.
Impact on ITC and Tobacco Industry
The new frame for companies like ITC LTD, which obtains more than 80% of its net profit from cigarettes, carries both risk and relief.
It is particularly important as ITC’s stock does not provide any return by reflecting GST concerns in the last two years.
On a weighted average basis, the consumer price of ITC cigarettes includes 55% tobacco taxation, 12% channel edge spaces and 23% fave margin.
Investors have long been nervous about regulatory uncertainty, share sales by British American Tobacco (BAT), and competitive pressure of global brands such as Marlboro.
After the rationalization meeting started on Wednesday, the intermediary company Jefferies said that it was positive to focus on income impartiality.
Analyst Based on our industrial interactions, we believe that the government plans to maintain income impartiality. This means that if it replaces compensation, it means that the overall tax burden on cigarettes will be a relaxation for ITC, ”he said.
He added that a stable taxation policy helps to prevent illegal cigarette trade under steep tax hikes.
Jefferies warned that the balance between specific and advertising Valorem tasks would be critical.
While certain tasks are constant per stick and do not increase with price increases, ad Valorem tasks increase with retail prices and reduce the Pricing Power of ITC.
“Only income impartiality is not important, the share of certain and advertising valoremi is important,” the report said.
Although ITC was bull on the long -term foundations, Jefferies expected the stock to be connected to the range until the revised Cess structure emerged.
Pushing from industry
On the other hand, the tax hike will trigger sharp reactions from industrial associations and analysts.
In December last year, when 35% was expected, Swadeshi Jagran Manch (SJM) called the proposal as a “bad idea ve and argued that it could lead to smuggling and cause income losses for the country.
All Indian Consumer Products Distributors Federation (AICPDF) and other groups, such as the Collective of Indian sellers with trade associations and sellers umbrellas, increased concerns about the GST Rationalization Plan.
Higher taxes will become a major difficulty for companies such as ITC, which obtains more than 80% of the net profit from cigarettes. In an annual report in the FY24-25, ITC said that steep taxation has already encouraged the transition to illegal cigarette and other slightly-taxed tobacco products.
The FMCG sector is expected to face similar pressures.
The Indian Beverage Association (IBA) argued that 40% tax on carbonated non -alcoholic beverages deterred innovation and growth.
Separately, a study by the Council of India International Economic Relations Research (ICRIER) observed that India’s carbonated beverage market worth $ 18.25 billion in 2022 continues to lag behind other developing countries such as Thai and Philippines.
Last year, a main report of Nilanjan Banik, Professor of Mahindra University Management School, warned that increasing the gst rates on non -alcoholic beverages and tobacco products, which affected low and medium -income households proportionally because their budgets were stretched higher than costs.
“Higher taxes are likely to be further hit by low and medium -income households, as they will force their budgets more,” he wrote.
In the meantime, the non -alcoholic beverages sector called the government to reduce GST to 18%in gas beverages. Industry representatives argued that lower taxation will make these products more affordable, increase investments and produce 1.2 lakh jobs annually by 2030.
Authorities defended the revision, saying that it was designed to be a comprehensive and long -term solution rather than incremental armor.
“The proposed exercise aims to renew and simplify the structure in a holistic and comprehensive way instead of a fragmented exercise,” he said to an official ET.
These internal tax reforms are heels, which Trump administration has recently brought a 50% tariff to Indian goods, one of the highest of any trade partner. This measure, which entered into force on 27 August 2025, said by US authorities as an response to India’s Russian oil imports and general “reconciliation” in trade talks. The movement of the center’s GST structure and the increase in internal consumption is a direct strategic measure to reduce economic spreading from new tariffs.
The facility committee under the GST Council, which includes officials from the center and states, opened the way for its presentation in 2025 by clearing the two Slab offers on Tuesday.
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