The GST Council is considering a significant change. The GoM is proposing a hike in the goods and services tax (GST) on everyone’s favorite bubbly drinks, cigarettes, and tobacco products.
Why is the GoM Proposing GST Hike on Tobacco and Drinks?
Right now, tobacco and fizzy drinks fall under the 28% slab. The group of ministers (GoM) has proposed increasing the GST rate on tobacco and drinks to 35%.
This reform, aimed at rationalising GST rates, is projected to increase government income significantly. Another reason behind this change is to discourage the consumption of tobacco products due to their health risks.
Effect of GST Hike on Tobacco & Drinks to 35%
Price Increases for Consumers
With higher taxes, prices for GST on tobacco and GST on aerated drinks will increase. This could discourage consumption but might also cause strain on budgets for many.
Challenges for Manufacturers
Producers in these sectors might face a decrease in demand and higher compliance requirements, including GST Return filing and GST payment obligations.
Revenue Growth for the Government
The higher indirect tax rates aim to boost revenue collection. Higher revenue can be used for developmental projects.
Conclusion
In conclusion, the GST Council’s decision on December 21 will bring clarity to the proposed adjustments. If approved, this increase will represent a significant shift in the GST rate rationalisation strategy. Businesses and consumers should remain alert, informed and prepared for the changes.
Moreover, If you want any other guidance relating to GST Registration, GST Return Filing or GST Updates, please feel free to talk to our business advisors at 8881-069-069.
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