What Are Sin Goods And Why They Attract The Highest GST Rate

The government has introduced a new 40% Goods and Services Tax (GST) slab, the highest in the regime, for "sin goods" and certain luxury items. Announced by Union Finance Minister Nirmala Sitharaman as part of new GST reforms, the new structure reduced taxes for most goods to 5% and 18%.

What Are Sin Goods?

"Sin goods" are products considered harmful to health or society. These include tobacco, gutka, pan masala, and alcoholic or sugary beverages. Governments worldwide often impose higher taxes on such goods to discourage consumption while raising revenue for public welfare.

In India, sin goods have consistently attracted the steepest GST rates, earlier charged at 28% plus an additional Compensation Cess. With the cess being phased out, the same burden has now been consolidated under a single 40% GST slab.

Why A 'Special Rate'?

The 40% slab is called a "special rate" because it applies only to a narrow list of goods, mainly sin goods and some super-luxury products. The rationale is:

• Ending the cess would have reduced the tax collected on these goods. By merging it with GST, the government keeps tax incidence unchanged.
• The high rate is meant to discourage consumption of products with adverse health or social effects.

Complete List Of Sin Goods Under 40% GST Slab

The following goods will now attract the highest GST rate:

• Pan masala
• Cigarettes
• Gutka
• Chewing tobacco
• Unmanufactured tobacco and tobacco refuse
• Cigars, cheroots, cigarillos
• Tobacco substitutes
• Aerated drinks
• Carbonated beverages (including fruit-based)
• Caffeinated beverages
• Cars larger than 1,200 cc (petrol) or 1,500 cc (diesel)
• Motorcycles above 350 cc
• Yachts
• Aircraft for personal use
• Racing cars
• Online gambling and gaming platforms

Most of these items were already under the 28% slab plus Compensation Cess, effectively taking the tax burden close to 40%. 

56th GST Council Meeting

The GST council scrapped the 12% and 28% slabs, reducing the structure to 5% and 18%. 

Everyday items like toothpaste, soaps, shampoos, small cars, televisions, and air conditioners will now be taxed at lower rates. Several medicines, daily staples, and even medical-grade oxygen have either been exempted or shifted to the 5% slab.

The new structure will come into effect from September 22.