The government has introduced a new 40% GST slab, the highest ever, aimed at “sin goods” and select luxury items. This GST 2025 update explains which products are affected and why they now face the steepest tax rate.
The government introduced a new 40% Goods and Services Tax (GST) slab, the highest in the current tax framework, specifically targeting “sin goods” and certain luxury items.
This change, announced by Union Finance Minister Nirmala Sitharaman as part of recent GST reforms, has seen a reduction in tax rates for the majority of goods to either 5% or 18%.
What Are Sin Goods?
“Sin goods” refer to products deemed detrimental to health or society. These include items like tobacco, gutka, pan masala, and alcoholic or sugary drinks. To discourage consumption and generate revenue for public welfare, governments around the globe often impose higher taxes on such goods.
| Category | Details |
|---|---|
| Carbonated & Caffeinated Drinks | Soft drinks, caffeinated beverages, and flavoured drinks now taxed at 40% (up from 28%). |
| Luxury Vehicles | Cars above 1,200 cc (and longer than 4,000 mm), motorcycles above 350 cc, yachts, personal aircraft, and racing cars now at 40% GST. |
| Tobacco Products | Remain at 28% GST + compensation cess until loans are cleared; will shift to 40% GST after. |
| Leisure & Gaming Services | Casinos, horse racing, lotteries, online money gaming, and IPL tickets to attract 40% GST. |
Also Read: GST Revision 2025: What Becomes Cheaper, What Gets Expensive? | Explained
In India, sin goods have traditionally faced the highest GST rates, previously set at 28% with an additional Compensation Cess. As the cess is being phased out, this burden has now been unified under a single 40% GST slab.
The 40% slab is designated a “special rate” because it applies exclusively to a limited range of goods, primarily sin goods and a few luxury items.
The reasons for this include:
- Maintaining Revenue: Ending the cess would have lowered tax revenue from these goods. By incorporating it into GST, the government ensures the tax incidence remains steady.
- Deterring Consumption: The elevated rate aims to discourage the use of products that have negative health or social implications.
Complete List Of Sin Goods Under 40% GST Slab
The following items will now incur the highest GST rate:
- Pan masala
- Cigarettes
- Gutka
- Chewing tobacco
- Unmanufactured tobacco and tobacco refuse
- Cigars, cheroots, cigarillos
- Tobacco substitutes
- Aerated drinks
- Carbonated beverages (including fruit-based)
- Caffeinated beverages
- Cars larger than 1,200 cc (petrol) or 1,500 cc (diesel)
- Motorcycles above 350 cc
- Yachts
- Aircraft for personal use
- Racing cars
- Online gambling and gaming platforms
Most of these products were already subjected to the 28% slab plus Compensation Cess, effectively bringing the total tax burden close to 40%.
The GST Council has eliminated the 12% and 28% tax slabs, simplifying the structure to just 5% and 18%.
Common products such as toothpaste, soaps, shampoos, small cars, televisions, and air conditioners will now be subject to lower tax rates.
Additionally, various medicines, essential food items, and medical-grade oxygen have been either exempted or moved to the 5% tax category.
All changes, across goods and services, will be implemented from 22nd September 2025, except for pan masala, gutkha, cigarettes, zarda, unmanufactured tobacco, and bidis, which will retain existing GST and compensation cess rates until compensation cess liabilities are cleared.
This revised tax structure will take effect on September 22.
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