GST on sin goods, cars may go up

The proposed revision of the Goods and Services Tax (GST) slabs structure may not raise the weighted average levy, but is likely to keep the tax incidence on “demerit and luxury goods” at roughly the currently levels.

While the compensation cess applied on these goods is likely to be dispensed with, effective FY27, other imposts like health or clean energy cess may be applied on them, sources said.

A proposal under consideration among official circles is to raise the tax rate on these items, which range from tobacco products and aerated drinks to cars, from 26% at present, subject to a 40% rate cap mandated under the GST Act.

Currently, the tax incidence on these items due to the combined effect of the 28% slab rate, and the compensation cess, ranges between 29-50%. The need for a hike the GST rate on the demerit and luxury goods arises, as the removal of the compensation cess will otherwise reduce the tax incidence on them. The other cesses that are being considered will be of lesser magnitude compared to the compensation levy.

According to the sources, the GST Council is expected to meet in June-July with a heavy agenda to discuss the much-awaited rate rationalisation/simplification, and the future of the compensation cess. The objective is to ensure that consumers, government, and industry benefit from the cessation of the compensation cess and the rate rationalisation process.

Source : https://www.financialexpress.com/business/industry/gst-on-sin-goods-cars-may-go-up/3880704/