Inshort: The Indian government plans to raise the current GST rate from 28% to 35% to impose higher taxes on cigarettes, tobacco products, and certain beverages. This proposal, could lead to increased prices for these products and potentially encourage reduced consumption. The government aims to increase revenue by improving the tax structure. However, it is avoiding increasing GST on commonly used consumer goods to fill the treasury. Shares of tobacco product manufacturers, have declined by up to 3%, also affecting many industries.
The Indian government plans to raise the current GST rate from 28% to 35% to impose higher taxes on cigarettes, tobacco products, and certain beverages. This proposal is put forward by the cabinet group tasked with improving the GST structure. If implemented, companies will have to increase prices of cigarettes and tobacco products, which currently have a 28% GST rate. An additional 5% to 36% tax can be levied depending on the length of the product. Luxury goods like cars and washing machines may also be subject to higher taxes.
The government’s goal is to increase revenue by improving the tax structure and eliminating harmful substances. However, it is avoiding increasing GST on commonly used consumer goods as part of reforming the tax structure to fill the treasury. This may lead to opposition, but increasing taxes on products that harm health will not hurt public sentiments.
Shares of several companies may decline if the cabinet group’s proposal is approved, as tobacco product manufacturers will be forced to raise prices and companies will need to revamp their marketing strategies. Investor concerns have led to a decline of up to 3% in the shares of these companies, affecting major players like ITC, VST Industries, and Godfrey Phillips.
