Heavy taxes on sin, luxury goods under GST

New Delhi, May 19 (IANS) Finance Minister Arun Jaitley and state finance ministers have not been able to resist the temptation of putting heavy taxes on so-called sin goods — tobacco, pan masala and aerated drinks as well as luxury vehicles under the Goods and Services Tax (GST).

The highest tax of 28 per cent has been imposed by the GST Council on these goods with heavy cess adding to the burden.

Also roped in are small cars in the 28 per cent GST rate, with an additional cess of 1-3 per cent levied on petrol and diesel cars of less than four metres.

The fattening aerated drinks have been taxed heavily apparently aimed at reducing their usage. The tax of incidence on aerated waters, lemonade and others comes to 31.36 per cent — 12 per cent cess on top of an ad-valorem tax of 28 per cent.

The total tax of incidence on pan masala comes to 44.8 per cent.

A cess of 5 per cent will be levied on cigarettes along with special tax in the range of Rs 1,591-4,170 per thousand cigarettes, taking the actual incidence of tax much beyond 29.4 per cent.

Motorcycles with more than 350 cc engines, personal aircrafts and yachts will attract a 28.84 per cent tax while mid-segment and high-end luxury cars will call for a tax of incidence of 32.2 per cent.

Tobacco and tobacco products will have a tax of incidence of 45.08 per cent to 85.12 per cent with cess ranging from 61-204 per cent.

The highest cess has been put on smoking mixtures for pipes and cigarettes at the rate of 290 per cent, leading to a 109.2 per cent tax incidence.

The highest slab of 28 per cent under GST has been applied on chewing gums, white chocolate, chocolates containing cocoa, wafers coated with chocolate, instant coffee, custard powder, students’ colours, paints, varnishes, perfumes, beauty products, sunscreen, shampoos, hair dyes, after-shave lotions and deodarants.

Additionally, fireworks, wash basins, articles of artificial fur, artificial flowers, wigs, razor blades, cutlery, air conditioners, refrigerators, storage water heaters, dish washers, photocopy machines, fax machines, insulated copper wires, cars, wrist watches, revolvers, pistols, cigarette lighters and smoking pipes, among others, will attract the highest slab.

However, some essential products like insulated copper wires have been placed under the highest category, which experts say could have been avoided.

"Insulated wire/cables at present are taxable at the rate of 19 per cent (excise at 12.50 per cent and VAT at 6 per cent). These will attract GST at 28 per cent thus substantially increasing the tax incidence on the end use of wire/cable, which is electricity generation. Moreover, electricity generating entities cannot claim GST credit," GST expert Pritam Mahure told IANS.