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‘Sin tax’ for alcohol, tobacco industries in GST regime

New Delhi: Alcohol and tobacco industries will have to pay more taxes towards an additional ‘sin tax’ under the proposed GST structure that seeks to bring in a uniform indirect tax regime across the country.

Najib Shah Chairman of  CBEC,   the nodal national agency responsible for administering Goods and Services Tax (GST).
Najib Shah Chairman of CBEC, the nodal national agency responsible for administering Goods and Services Tax (GST).

“We have kept a provision of having an additional tax for the sinful industries such as alcohol and tobacco,” a senior Finance Ministry official said.

However, the official did not specify the rate at which this tax would be levied under the proposed GST regime.

‘Sin tax’ is a globally prevalent practice under which products like alcohol and tobacco attract higher rates of tax.

Typically, ‘sin tax’ is an excise tax that is levied on products and services considered to be bad for health or society such as alcohol, tobacco and gambling. These additional taxes are also seen as efforts to discourage people from use of such products or services.

Besides, such taxes are often the most common measures by the governments to shore up their tax revenues as people generally refrain from opposition to such levies as they are indirect in nature and affect only their end users.

The Finance Ministry is currently seeking inputs from the industry and other stakeholders at national, state and local levels on the Goods and Services Tax (GST) law.

“Everybody is getting a chance to interact with us so that they get a clarity on the concept and the business processes, which we are in the process of finalising,” the official added.

“If we find there are some gaps or areas of concerns, we will certainly look into those areas. Nothing has been frozen so far and all these proposals are drafts as of now.

“We are waiting for the comments and suggestions and we will be going through all suggestions from the industry. After making necessary changes based on those suggestions, a final report would be placed before the GST council before the final GST law is framed,” the official added.

GST is being seen as one of the biggest tax reforms in the country. While the Constitution Amendment Bill to roll out the law has been passed in Lok Sabha, it is awaiting clearance from the Rajya Sabha where the ruling NDA lacks a majority.

The government is meanwhile undertaking the preparatory work necessary for GST implementation, which will subsume various taxes like excise, service tax, sales tax, octroi, etc, and will ensure a single indirect tax regime.


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