The Group of Ministers (GoM) on GST rate rationalisation has proposed significant changes to the current tax structure, including a hike in the tax rate on sin goods such as aerated beverages, cigarettes, and tobacco products to 35%, up from the existing 28%. The recommendations were made during a meeting chaired by Bihar Deputy Chief Minister Samrat Chaudhary on Monday.

The GoM also suggested a revised tax structure for readymade garments, introducing tiered rates based on cost. Under the proposal, garments priced up to ₹1,500 would attract 5% GST, those between ₹1,500 and ₹10,000 would be taxed at 18%, and garments costing above ₹10,000 would fall under the 28% slab.

Additionally, the GoM plans to propose tax rate adjustments for 148 items, which will be reviewed by the GST Council. The council, chaired by Union Finance Minister Nirmala Sitharaman and comprising state finance ministers, is scheduled to meet on December 21 to discuss these recommendations.

“The net revenue impact is expected to be positive,” an official stated, highlighting the potential fiscal benefits of the proposed changes.

The GoM affirmed that the existing four-tier GST structure — with slabs at 5%, 12%, 18%, and 28% — will remain, while the new 35% rate would apply exclusively to sin goods. Currently, luxury and demerit items like cars, washing machines, aerated beverages, and tobacco products are taxed at the highest slab of 28%, with additional cess.

This move aims to bolster revenue generation while adhering to the principle of taxing luxury and demerit goods more heavily than essential items. Essential goods would continue to either be exempted from GST or fall under the lowest tax slab.

The final decision on these rate changes will be taken by the GST Council after deliberation.