What Are Sin Goods? Understanding Why They Face the Highest GST Rate

What Are Sin Goods And Why They Attract The Highest GST Rate

Sin Goods Under 40% GST Slab: Complete List and Explanation
Introduction
The Government of India has introduced a new 40% Goods and Services Tax (GST) slab, the highest in the regime, applicable to sin goods and select luxury items. Announced by Union Finance Minister Nirmala Sitharaman during the 56th GST Council Meeting, this reform reduces the majority of goods to just two slabs — 5% and 18% — while consolidating the heaviest taxes under the new 40% special rate.

What Are Sin Goods?
Sin goods are products considered harmful to health or society. These typically include:
Tobacco and related products
Pan masala and gutka
Alcoholic, sugary, or carbonated beverages
Governments worldwide impose higher taxes on sin goods to:
Discourage over-consumption
Generate revenue for public health and welfare initiatives
In India, these products earlier faced 28% GST plus a Compensation Cess. With the cess now phased out, the burden has been merged into a single 40% GST slab.

Why a Special 40% GST Rate?
The 40% GST slab is termed a special rate because it applies only to sin goods and ultra-luxury products. The rationale behind this tax policy is:
Preventing revenue loss after phasing out the Compensation Cess
Continuing to discourage harmful consumption
Ensuring luxury and non-essential items bear higher tax incidence

Complete List of Sin Goods Under 40% GST Slab
The following goods will now attract the highest GST rate in India:
Pan masala
Cigarettes and cigars
Gutka
Chewing tobacco
Unmanufactured tobacco & tobacco refuse
Cigarillos and tobacco substitutes
Aerated drinks & carbonated beverages (including fruit-based)
Caffeinated beverages
Large cars (petrol above 1,200 cc / diesel above 1,500 cc)
Motorcycles above 350 cc
Yachts & aircraft for personal use
Racing cars
Online gambling and gaming platforms
🔎 Note: Most of these products were already under the 28% slab + cess, which made the effective tax close to 40%. The new system simply consolidates this into one slab.

Key Highlights from the 56th GST Council Meeting
12% and 28% slabs scrapped → GST structure simplified to 5% and 18%
Everyday essentials like toothpaste, soaps, shampoos, TVs, air conditioners, and small cars will now fall under lower slabs
Many essential medicines, food staples, and even medical-grade oxygen have been moved to the 5% category or made tax-exempt
The new GST rates will be effective from September 22

Conclusion
The introduction of the 40% GST slab ensures that sin goods and luxury items continue to be taxed heavily, while common-use products benefit from reduced GST rates. This move simplifies India’s indirect tax regime, balances revenue collection, and promotes responsible consumption.