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Government to Increase GST on Cigarettes and Tobacco Products to 35%
Starting soon, you might have to pay more for cigarettes, tobacco products, and certain special beverages. The Government of India plans to hike the GST on these items from 28% to 35%, aiming to reduce their consumption and improve public health. This proposal, put forth by the Cabinet Group tasked with reforming the GST structure, is expected to impact prices significantly.
Impact on Prices
If implemented, companies will be compelled to raise the prices of cigarettes and tobacco products. Currently, these items attract a 28% GST, with additional taxes ranging from 5% to 36% based on the product’s length. Luxury goods like cars and washing machines might also see a tax hike, leading to higher costs for consumers.
Government’s Revenue Strategy
The primary goal of this proposal is to boost government revenue by refining the tax structure. By increasing taxes on harmful products, the government aims to discourage their use without affecting commonly used consumer goods. This strategy is designed to avoid public backlash while promoting healthier choices.
Market Reactions
The proposal has already caused a stir in the stock market. Shares of companies like ITC, VST Industries, and Godfrey Phillips have dropped by 3% due to investor concerns about potential earnings reductions. These companies will need to revise their marketing strategies to adapt to the new tax regime.
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