Article Today, New Delhi:
The GST Council has announced a significant reform in the tax structure. From September 22, the Council will retain two main slabs at 5 per cent and 18 per cent. However, items considered harmful to public health and luxury products will attract a higher tax of 40 per cent. The government said the move is intended to safeguard public health and promote social equity.
Health and Social Welfare Focus
Officials explained that cigarettes, alcohol, pan masala, and similar products fall under the “sin goods” category. The steep tax rate is expected to reduce their consumption by making them less affordable. The government also stated that additional revenue generated would be channelled into welfare programmes, thereby linking taxation policy to social benefits.
Luxury Segment Under Higher Tax
Alongside sin goods, expensive cars, designer clothing, high-end electronic gadgets, and luxury hotel services will also come under the 40 per cent tax bracket. The Council argued that such products are not meant for mass consumption and are largely purchased by affluent sections of society. The decision, it added, will help reduce economic disparities by redistributing resources through increased taxation of luxury spending.
Concerns Over Behavioural Impact
Experts remain divided over whether higher taxation will discourage addiction. Studies suggest that consumers often adjust other household expenses to maintain their habits. In this context, some analysts argue that the decision may place a heavier financial burden on users without effectively reducing consumption.
Government Revenue Dependence
The issue is further complicated by the reliance of State governments on revenue from alcohol sales. Large-scale liquor retail networks, including licensed shops and informal outlets in rural areas, continue to provide steady income for States. Critics point out that while governments officially discourage alcohol consumption, they also depend on it for fiscal stability.
Broader Implications
The Council’s decision has triggered debate nationwide. While public health advocates welcomed the attempt to reduce harmful habits, sceptics warned that taxation alone cannot address addiction or social issues linked to substance use. The measure, they said, may improve government revenue but its long-term social impact remains uncertain.
