The GST Council has approved a major restructuring of India’s indirect tax system, reducing the existing four tier slabs to just two 5% and 18% from September 22, 2025. Alongside this simplification, the council introduced a new highest tax rate of 40% aimed at “sin” and luxury goods.
Goods under the 40% GST slab include:
- Tobacco and related products such as cigarettes, bidis, gutka, chewing tobacco, and pan masala.
- Aerated and sugary beverages, including caffeinated soft drinks and flavored drinks with added sugar.
- Luxury and non essential items like high end cars, yachts, private aircraft, and entertainment services such as casinos, betting, and online gaming.
According to officials, the purpose of the 40% slab is not only to increase revenue but also to discourage the consumption of harmful products while keeping everyday essentials in lower tax brackets. The restructuring is expected to make the GST regime simpler for businesses while ensuring luxury and unhealthy items are heavily taxed.
