GST 2.0: Daily Goods to Get Cheaper, But Pan Masala and Cigarettes to Cost More

The Goods and Services Tax (GST) Council on Wednesday announced a major restructuring of the tax system, simplifying it into a two-slab structure while imposing a special 40% levy on so-called ‘sin goods’ such as pan masala, gutkha, tobacco products, cigarettes, aerated and flavoured drinks, and luxury vehicles.

What Has Changed?

Earlier, GST was divided into four slabs—5%, 12%, 18% and 28%. Under the new framework, the Council has streamlined the system into just two rates:
5% (Merit Rate)
18% (Standard Rate)

Which Items Will Attract 40% Tax?

The Council has decided to impose a higher levy on harmful and high-end goods, including:

1. Motorcycles above 350cc
2. Cars with engines over 1200cc or longer than 4000 mm
3. Private jets and aircraft
4. Aerated, sugary, fruit-based carbonated, and caffeinated drinks
5. Pan masala, gutkha, cigarettes, and other tobacco products
6. Unprocessed tobacco and nicotine products

Additionally, casinos, race clubs, betting, gambling, horse racing, lotteries, online gaming, yachts, and leasing services will also attract the 40% tax.

When Will the New Rates Apply?

The revised GST rates—excluding pan masala, gutkha, cigarettes, chewing tobacco, raw tobacco, and bidis—will take effect from September 22, coinciding with the start of Navratri.
Finance Minister Nirmala Sitharaman clarified that tobacco and related products will remain under the existing structure with an additional cess until the government repays the borrowings undertaken during the COVID-19 pandemic to compensate states for revenue loss.