What are ‘sin goods’ and why do they now attract the highest GST rate?

At its 56th meeting on September 3, 2025, the GST Council announced a simplified tax structure comprising two main slabs, 5% and 18%, alongside a special 40% rate applicable only to designated “sin goods” and certain luxury items, effective from September 22. This revision comes after the removal of the Compensation Cess, with the tax incidence preserved under the consolidated GST framework.

Also Read: GST Council meeting updates

What qualifies as “sin goods” attracting 40% GST?

“Sin goods” are products that are generally considered harmful to the society, which may cause harm to the health, or if they are harmful by a moral prism. This includes alcohol, tobacco, gambling or betting, food products with high fat or sugar content, and so on. Such goods and services are tax higher in a bid to dissuade people from using them.

In addition to ‘sin goods‘, ultra-luxury products and services are also taxed highest.

Here is a list of categories that are being taxed the highest:

• Tobacco-related products such as pan masala, gutka, chewing tobacco, unmanufactured tobacco and refuse, cigars, cheroots, cigarillos, and substitutes.

• Aerated, carbonated, sugary, and caffeinated beverages (including fruit drink variants).

• Motor vehicles including motorcycles exceeding 350 cc, petrol cars above 1,200 cc, and diesel cars above 1,500 cc (or length over 4,000 mm), as well as utility vehicles (SUVs, MPVs, etc.) meeting similar thresholds.

• Super‑luxury items such as yachts, personal aircraft (including helicopters), and racing cars.

• Online gaming, gambling, lotteries, betting, and casino services, including admissions to certain sporting events.

Complete list of ‘sin goods’ under 40% GST slab

The following goods are included in the highest 40% GST rate category:

• Pan masala

• Cigarettes

• Gutka

• Chewing tobacco

• Unmanufactured tobacco and tobacco refuse (excluding leaves)

• Cigars, cheroots, and cigarillos (including tobacco substitutes)

• Aerated drinks (sugary/soft drinks)

• Carbonated beverages, including fruit-based and fruit-juice variants

• Caffeinated beverages

• Motorcycles with engine capacity above 350 cc

• Cars: petrol above 1,200 cc or diesel above 1,500 cc, including large SUVs and luxury vehicles

• Yachts

• Personal aircraft (including helicopters)

• Racing cars

• Horse racing

• Betting, casinos

• Lottery

• Admissions to casinos, race clubs, and certain sporting events like the IPL

These items were already taxed at 28% GST plus Compensation Cess, resulting in an effective tax rate of nearly 40%. The new 40% slab consolidates the total tax burden under a single rate.

What are the cost implications for consumers?

1. Many commonly used items, such as toothpaste, shampoos, soaps, small cars, televisions, air conditioners, and insurance policies, have shifted to the reduced slabs of 5% or 18%, potentially lowering their retail prices.
2. Some basic food items (e.g., UHT milk, paneer, Indian breads) have been placed in the zero‑GST category, further reducing the cost of living.

Union Finance Minister Nirmala Sitharaman said that the decisions would come into effect from September 22 for most items. Only tobacco and tobacco-related products will move to the new structure at a date to be specified by the Finance Minister.

Why is alcohol not in this list?

Alcohol is currently not under GST. The State governments tax alcohol, and generally the taxes and duties and it varies in each State. Taxation accounts for 67 to 80% of the prices of alcoholic beverages, according to the International Spirits and Wines Association of India (ISWAI).