The government is studying the reduction on sin commodities under GST 2.0

The center may consider submitting the reduction on sin commodities according to its proposed framework GST 2.0, amid fears of industry that the sharp rise in tax rates can strongly affect the sector.

As part of the repair of next commodity and services tax, the government plans to unify the current tax panels in two basic rates, 5 % and 18 %, which led to the disposal of the two brackets 12 % and 28 %. However, sin commodities may attract a higher rate of 40 %, according to the sources of the Ministry of Finance.

Although the Central Commodity and Services Tax Law (CGST), 2017, does not explicitly determine the term “sin commodities”, products such as tobacco, cigarettes, aerobic beverages, Masala and some luxurious elements that are currently falling under this category and taxes are imposed on them through a compensation mechanism, instead of saving allocated in the act.

Although online games are also subject to tax at a high rate (28 %), they are in a separate category usually treated as “luxury service” or “unnecessary service”. However, the center may still consider its inclusion in the special tax category by 40 % proposed, the sources said.

In response to concerns about the impact of an average of 40 %, it is said that the government is studying the option to reduce under Article 15 of the CGST law, specifically through the 31A, 31B and 31C rules, which provide special evaluation methods for some goods and services.

The reduction allows a tax reduction reduction, which means that the tax rate remains the same, but it is applied to a smaller part of the price, thus reducing the effective tax burden. According to sources, the government may consider a 5-10 % reduction to help the sector absorb the new rate without the need for sunset.

The Law Committee examines whether the application of the evaluation rules for Article 15 will be applied uniformly across all SIN goods.

However, this is still just one of many options under study, and the GOM group (GOM) will decide to rationalize prices, which is scheduled to meet on August 21, in this matter.