Smoking to Cost More This Diwali: Here’s Why
Thank you for reading this post, don't forget to subscribe!This Diwali, expect your cigarettes and other tobacco products to get more expensive. The government is introducing significant GST reforms that will increase the tax on “luxury” and “sin” goods. This move is part of a plan to replace the current tax structure with a new one that includes a higher tax on products considered harmful to health and society.
Key Changes to GST Rates
The current GST system, which has multiple tax slabs (0%, 5%, 12%, 18%, and 28%), is being simplified. The new plan proposes just two main tax slabs: 5% and 18%.
- Most items currently in the 12% slab will move to the 5% slab, making many common goods cheaper.
- The majority of items taxed at 28% (like appliances and cement) are expected to shift to the 18% slab.
In addition to these changes, a special, higher 40% tax slab will be introduced for a select few luxury and sin goods. This is a significant jump from the current 28% GST on these items.
How This Affects Cigarettes and Other Sin Goods
Cigarettes and other tobacco products, along with online gaming, are expected to be included in the new 40% GST slab. This new rate will be charged in addition to the existing compensation cess, which can be as high as 290% on cigarettes. This combination of a higher GST and the cess will drive up the final price for consumers.
The government imposes high taxes on these products to discourage their use. This aligns with the World Health Organization’s “3 by 35 Initiative,” which encourages countries to raise taxes on sugary drinks, alcohol, and tobacco to reduce consumption and prevent related diseases.
