NEW DELHI: Even as the GST on most household and aspirational items has been reduced, some items have been assigned a special rate of 40%. This special rate is applicable only to a few selected goods, predominantly "sin goods" and a few luxury items.
The special rate was introduced because many of these goods previously attracted a Compensation Cess in addition to the standard GST. To maintain a consistent tax incidence after the decision to end the Compensation Cess, the cess rate is being merged with the GST. For other goods and services, this special rate has been applied because they were already in the highest GST bracket of 28%.
The list of goods and services subject to the 40% GST rate is as follows:
Pan masala
All goods (including aerated waters) containing added sugar, other sweetening matter, or flavoring.
Other non-alcoholic beverages.
Carbonated Beverages of Fruit Drink or Carbonated Beverages with Fruit Juice; Caffeinated Beverages.
Unmanufactured tobacco; tobacco refuse (other than tobacco leaves); Cigars, cheroots, cigarillos, and cigarettes, of tobacco or tobacco substitutes.
Other manufactured tobacco and manufactured tobacco substitutes; "homogenised" or "reconstituted" tobacco; tobacco extracts and essences; Products containing tobacco or reconstituted tobacco intended for inhalation without combustion; Products containing tobacco or nicotine substitutes intended for inhalation without combustion.
Larger passenger cars, SUVs, and high-end luxury vehicles.
Aircraft for personal use.
Yachts and other vessels for pleasure or sports.
Lottery tickets, betting, gambling, horse racing, and casinos.
Admission to casinos, race clubs, any place with casinos or race clubs, or sporting events like the IPL.
The government has clarified that pan masala, gutkha, cigarettes, chewing tobacco products like zarda, unmanufactured tobacco, and bidis will continue at their existing GST and compensation cess rates until the loan and interest payment obligations under the compensation cess account are fully discharged.
Explaining the reason for the 40% GST rate on ‘other non-alcoholic beverages,’ the government stated that the principle behind the recent rate rationalisation is to keep similar goods at the same rate to avoid issues of misclassification and disputes. This principle has also been applied to 'other non-alcoholic beverages'.