Highest Goods Tax (GST) Rate of 40% Set by Council; Check List Included

Highest Goods Tax (GST) Rate of 40% Set by Council; Check List Included

New GST Rates Introduced: A Simplified Tax Structure for Sin and Luxury Goods

The Goods and Service Tax Council (GST) has unveiled a new tax structure under GST 2.0, which includes a 40% slab for sin and luxury goods. This change, announced at the 56th meeting of the GST Council chaired by Union Finance Minister Nirmala Sitharaman, is part of the "Next-Generation GST" reform initiative aimed at boosting affordability, consumption, and economic efficiency.

Under the new tax regime, premium goods that will be taxed under the 40% slab include large vehicles, mid- and large-sized cars priced more than Rs 50 lakhs, bikes with an engine capacity of more than 350cc, aircraft for personal use, yachts, and more. Additionally, all goods, including aerated waters containing added sugar or other sweetening matter or flavoured, caffeinated beverages, carbonated beverages of fruit drink or carbonated beverages with fruit juice, and other non-alcoholic beverages, excluding those specified at lower rates, will all be covered under 40%. Other non-alcoholic beverages, including those containing added 28% sugar or other sweetening matter, will also be taxed under the 40% slab.

Sin goods such as alcohol, tobacco, candies, drugs, soft drinks, fast foods, coffee, gambling, and pornography will also fall under the 40% slab. The tax levied on these goods is called Sin Tax. The new GST rates also include paan masala, cigarettes, gutka, and other tobacco products such as chewing tobacco, products like zarda, unmanufactured tobacco, and Bidi.

However, it's worth noting that the GST on Gold remains unchanged in the new tax regime. Goods eligible for the 40% tax rate primarily include business assets like company cars that are used at least 90% for business purposes and meet specific conditions for special depreciation under § 7g Abs. 5 EStG; the 40% applies as a special depreciation rate on acquisition costs if the previous year's profit did not exceed 200,000 euros.

The new GST rates replace the existing four-rate system and will come into effect from September 22. The new GST regime consolidates the 12% and 18% slabs into a dual rate structure of 5% and 18%, along with 40% for sin goods. The removal of the 12 per cent and 18 per cent slabs is part of the effort to streamline the tax system and make it more efficient.

This tax overhaul process is expected to bring about significant changes in the Indian tax landscape, making it simpler and more transparent for both businesses and consumers. The new GST rates are part of the GST 2.0 reforms, which are designed to modernise and improve the GST system in India.

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