Delhi: In a significant step towards restructuring India’s Goods and Services Tax (GST) system, a special tax rate of 35% has been proposed for demerit goods such as aerated beverages, cigarettes, tobacco, and related products, as per media reports. This marks the first major overhaul of GST rates since the tax regime’s implementation seven years ago.

The recommendation was finalized during a meeting of the Group of Ministers (GoM) on rate rationalization on Monday, ahead of the GST Council meeting scheduled for December 21. The GoM’s report includes proposals for rate adjustments on over 148 items, including readymade garments, alongside the creation of the 35% slab for sin goods.

Currently, sin goods are taxed under the highest GST slab of 28%. The proposed hike aims to compensate for potential revenue losses stemming from planned rate reductions on essential and common-use items. “This adjustment will help the Centre and states maintain revenue balance while supporting rate cuts for widely used goods,” an official explained.

Despite these changes, the existing four-slab GST structure—5%, 12%, 18%, and 28%—will remain intact for the medium term, according to a state finance minister. The final decision on these proposals will be taken at the GST Council meeting later this month.

This move is expected to have far-reaching implications for consumers and businesses, particularly those dealing in sin goods and other re-categorized items.