Following the 56th GST Council meeting, Union Finance Minister Nirmala Sitharaman has taken a swipe at the Congress party regarding their stance on GST rates for tobacco and gutkha products. Sitharaman questioned whether the Congress party was advocating for a mere 5% GST on these harmful items.

Sitharaman's remarks came after announcing significant changes to the GST structure, including a new 40% tax slab for sin and luxury goods. This highest slab is intended to eventually replace the current cess mechanism and will apply to products like paan masala, cigarettes, gutkha, chewing tobacco, zarda, unmanufactured tobacco, and bidis, as well as premium items like large cars and high-end consumer goods.

The Finance Minister highlighted the opposition's "double standards," reminding everyone that the Congress party had previously deemed GST implementation "impossible". She emphasized that under Prime Minister Modi's leadership, GST was not only implemented but is also undergoing second-generation reforms to benefit common citizens, MSMEs, and labor-intensive sectors. She also added that the public would soon recognize their confusion tactics and expose them.

The GST Council has approved a rate overhaul by limiting slabs to 5% and 18%, effective from September 22nd. Essential items such as food and textiles will be taxed at a uniform 5%, while consumer durables including refrigerators, large-screen televisions, and air-conditioners will be brought under the 18% bracket, reducing their overall tax burden. Individual health and life insurance policies have also been exempted from GST.

However, tobacco, gutka, and related products will continue to be charged at the current 28% plus a compensation cess until loans taken to pay states for revenue loss are fully paid back. The Union Finance Minister is authorized to decide on the actual date of transition for these tobacco-related products as soon as the loan and interest are repaid.

Sitharaman clarified that the 40% rate is specifically for tobacco-based products and certain high-sugar and carbonated beverages, including caffeinated and fruit-based fizzy drinks. The existing 28% slab along with the compensation cess will remain until pending GST loans are repaid, after which those categories will be subsumed into the new 40% band. With this rationalization, the GST system now rests on three broad slabs—5%, 18%, and 40%, effectively scrapping the earlier 12% and 28% categories.