In a sweeping overhaul of the Goods and Services Tax (GST), the GST Council has introduced a steep 40% tax slab for “sin goods”—including gutka, pan masala, chewing tobacco, and cigarettes. This move replaces the previous GST plus compensation cess, streamlining the structure while aiming to curb consumption of harmful products.
What Has Changed?
- The new GST reforms consolidate tax rates into two standard slabs (5% and 18%) and introduce a Class-C slab of 40% specifically for sin and luxury goods such as gutka and pan masala.
- Importantly, this 40% will now be applied based on retail sale price, instead of the earlier ex-factory rate, increasing effective tax incidence.mint
Impact on Prices & Consumers
- Industry estimates suggest the GST hike could trigger a 5–6% increase in retail prices for tobacco-based products, including gutka and pan masala
- However, the implementation date has been deferred. These changes will not take effect on September 22, 2025, along with the rest of the GST 2.0 reform, but at a later unspecified date.
Why the Hike?
- Simplification of GST Structure
This tax hike replaces the cumbersome system of GST plus compensation cess (which sometimes exceeded 200%) with a unified 40% GST for harmful products. - Public Health Strategy
The legislature aims to curb consumption of harmful substances by making them pricier and harder to afford. - Revenue Assurance
With the shift to RSP-based taxation and consolidation, the government ensures better compliance and sustained collections.
Quick Summary Table
| Item | New GST | Effective Date | Expected Price Impact |
|---|---|---|---|
| Gutka, Pan Masala, Cigarettes | 40% (on RSP) | Deferred — not effective on Sept 22, 2025 | Anticipated 5–6% hike in prices |
