Sin Goods: What They Are and Why They’re Taxed in the Highest GST Slab

The tax system just got a big shake-up. Union Finance Minister Nirmala Sitharaman has announced a new 40% Goods and Services Tax (GST) slab, the highest so far aimed at sin goods and select luxury items. At the same time, the government has simplified the GST structure by trimming most goods into just two slabs: 5% and 18%.

What Are Sin Goods ?

Sin goods are products seen as harmful to health or society think tobacco, gutka, pan masala, alcohol-based drinks, and sugary or fizzy beverages. Governments worldwide tax them heavily, both to discourage use and to generate revenue for public welfare.

Why 40%?

Until now, sin goods attracted 28% GST plus an extra Compensation Cess. With the cess being phased out, the government has merged the burden into one consolidated 40% slab. It keeps the tax level the same, while continuing to discourage harmful consumption.

Items Under the 40% Slab

Here’s the list of goods that will now attract the highest slab:

• Pan masala, gutka, chewing tobacco, cigarettes, cigars, and substitutes
• Aerated, carbonated, and caffeinated beverages
• Luxury vehicles: petrol cars above 1,200 cc, diesel cars above 1,500 cc, motorcycles above 350 cc
• Super-luxury items: yachts, racing cars, aircraft for personal use
• Online gambling and gaming platforms

Why It’s a ‘Special Rate’

The 40% rate applies to a very narrow basket of goods. It’s not for essentials or even most luxury goods, but specifically for items that either harm public health or symbolize extreme luxury.

Relief for Everyday Items

While the 'sin goods' face the stiffest taxes, consumers get relief elsewhere. Everyday products like toothpaste, soaps, shampoos, televisions, and air conditioners now fall under lower 5% or 18% slabs. Essential medicines, staples, and even medical-grade oxygen have been exempted or reduced to the 5% category.

What Changed in the GST Council Meeting?

In its 56th meeting, the GST Council scrapped the old 12% and 28% slabs, streamlining the tax system. The new, simpler structure will officially roll out from September 22.