Quick Summary
The government is considering an additional levy on tobacco and cigarettes to ensure that the tax incidence on these "sin goods" remains unchanged despite the upcoming GST overhaul. Under the revised structure, effective September 22, 2025, sin goods and ultra-luxury items will be taxed at 40%, replacing the earlier 28% slab. However, with the proposed abolition of the 28% compensation cess later this year, the effective tax burden on items such as tobacco and cigarettes could reduce. "Under G
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FAQ :
An additional tax may be imposed to ensure the overall tax incidence on these 'sin goods' remains unchanged, even with the upcoming GST overhaul and the move to a 40% GST rate.
The new GST rate for sin goods and ultra-luxury items will be 40%, replacing the previous 28% slab, effective September 22, 2025.
No, ultra-luxury items like high-end cars and motorcycles will only attract the flat 40% GST rate and will not face any extra levy.
Contrary to earlier expectations, the compensation cess will now continue until December 2025.
The CBIC is issuing notifications for new rates and updating IT systems. Businesses will also need to update their ERP systems for correct invoicing under the new rates.
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