New GST Rates: Soft Drinks, Cigarettes & More: Full List of Items Getting Costlier From Sept 22 Under 40% Slab

While the majority of products from big-ticket items like cars and motorcycles to daily essentials and household goods are set to become cheaper starting from the first day of Navratri, September 22, a separate move by the GST Council is set to make some items costlier. In a major overhaul of the Goods and Services Tax (GST) framework, the Council has introduced a new 40% tax slab, aimed specifically at luxury items and sin goods such as aerated drinks, premium vehicles, yachts and tobacco products.

New GST Rates: What Will Become Costlier From September 22? Check Complete List of Items Under 40% GST Slab

The newly introduced 40% GST bracket will apply to a range of premium products across sectors, effectively making them more expensive for consumers. Under the new slab, all types of aerated water, carbonated drinks, caffeinated beverages and non-alcoholic flavored drinks will attract the highest GST rate. This includes a wide range of soft drinks and energy beverages commonly available in the market.

The 40% tax will also apply to luxury vehicles. This includes cars with engine capacity above 1,200cc and length exceeding 4,000 mm, along with motorcycles over 350cc. These categories typically include high-end sedans, SUVs, and premium bikes.

In addition, personal-use luxury transport vehicles such as yachts, private aircraft, and racing cars will fall under the same high tax slab. However, these will be taxed at 40% only when used for personal or recreational purposes, and not for commercial use.

List of all items to become costlier, which will fall under the 40% GST slab (effective immediately from September 22):

• Aerated water
• Carbonated drinks
• Caffeinated beverages
• Non-alcoholic flavored drinks
• Soft drinks
• Energy drinks
• Cars with engine capacity above 1,200cc
• Cars longer than 4,000 mm
• Motorcycles with engine capacity over 350cc
• Yachts (for personal use)
• Private aircraft (for personal use)
• Racing cars (for personal use)

List of Items To Be Taxed at 40% GST in the Future (After Loan Repayment):

• Pan masala
• Gutkha
• Cigarettes
• Chewing tobacco
• Zarda
• Raw tobacco
• Bidis

Sin Goods Like Pan Masala, Cigarettes and Tobacco to Be Taxed at 40% GST

While the 40% slab has been earmarked for sin goods-including pan masala, gutkha, cigarettes, chewing tobacco, zarda, raw tobacco, and bidis-the higher tax will not be implemented immediately for these products.

In a clarification issued by Finance Minister Nirmala Sitharaman, who chairs the GST Council, it was announced that the current tax regime on tobacco and related products will remain unchanged until existing compensation-related loans are fully repaid.

These loans were taken by the central government during the COVID-19 pandemic to compensate states for GST revenue losses. Sin goods, which already attract a compensation cess over and above the base GST rate, will continue to be taxed under this system for the time being.

"The new 40% GST slab will eventually apply to sin goods, but only after the full repayment of loans and interest taken for pandemic-related revenue compensation," FM Sitharaman announced.

When Will the New Tax Apply to Tobacco Products?

There is currently no fixed date for the implementation of the new tax slab on tobacco-related items. The transition will take place only after the government clears all pandemic-era compensation liabilities. Once that happens, the GST Council-chaired by the Union Finance Minister-will decide on the effective date for migrating sin goods to the 40% GST bracket.

What This Means for Consumers

While consumers of luxury goods and lifestyle products will see an immediate price impact from the new 40% tax, those who purchase sin goods like tobacco products will continue to pay under the current regime-at least for now. However, a future price hike appears inevitable once the compensation cess system is phased out.