New GST Slab of 35% Proposed: Find Out Which Products May Soon Fall Under This Slab

The Indian GST framework may undergo a significant change as discussions around revising tax rates gain momentum. The Group of Ministers (GoM) on GST rate rationalization has proposed a new 35% GST slab for specific items, marking a potential shift in the taxation landscape. This move is positioned as a dual-purpose measure aimed at public health enhancement and revenue generation.

The Rationale Behind the Proposed 35% GST Slab

The suggestion to introduce a higher GST rate stems from the government’s commitment to discourage the consumption of demerit goods—products deemed harmful to health or the environment. These items often exhibit inelastic demand, meaning their consumption remains relatively stable despite price hikes, making them a reliable revenue source for the government.

While the current GST system follows a four-tier structure with rates of 5%, 12%, 18%, and 28%, the addition of a 35% slab represents a targeted approach to address concerns around certain high-risk products. The hike aligns with the broader strategy of discouraging unhealthy habits and generating funds for public initiatives.

Public Health and Financial Objectives

The increased taxation aims to dissuade price-sensitive consumers from indulging in products that contribute to lifestyle diseases such as cancer, diabetes, and obesity. By making these items less affordable, the government hopes to promote healthier choices. Simultaneously, the move is expected to yield a substantial revenue boost, reducing reliance on the compensation cess set to expire in March 2026.

Which Products Could Be Affected?

The proposed 35% GST rate targets sin goods, which are often criticized for their detrimental impact on health and society. These include tobacco, cigarettes, smokeless tobacco products, and aerated beverages. Presently, these goods fall under the 28% GST slab with an additional compensation cess of up to 290%. The hike, if implemented, would further discourage their consumption and align with the government’s long-term objectives.

The GoM’s recommendations are still under review, with the Finance Minister urging caution against speculative conclusions. However, the potential changes underscore the government’s focus on balancing fiscal needs with public welfare, making this a critical development to watch.