India has raised taxes on sin and luxury goods, effective from September 22, 2025. The tax structure will witness a major reform with the introduction of a 40% GST slab. This eliminates the 12% and 28% brackets, leaving only three: 5%, 18%, and 40%.
Why 40% Tax Slab?
The new highest slab is meant mainly for luxury and non-essential products. Items such as high-end cars, premium motorcycles, aerated drinks, and tobacco products fall under this category.
While cigarettes are included in the 40% tax bracket, experts note this doesn’t mean prices will automatically rise, as other market factors will also influence final costs.
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For pan masala, gutka, and chewing tobacco, the revised rate will apply later due to pending technical issues tied to industry loans.
Products Under 40% GST
Here’s the list of goods and services that will attract the new tax slab:
Tobacco and Pan Masala (Sin Goods)
- Pan masala
- Gutka www
- Chewing tobacco
- Unmanufactured tobacco and refuse (excluding leaves)
- Cigarettes
- Cigars, cheroots, cigarillos, and substitutes
Aerated and Sugary Beverages
- Carbonated drinks
- Sugary soft drinks
- Caffeinated fizzy beverages
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Luxury Cars
- Petrol cars above 1200 cc
- Diesel cars above 1500 cc
Premium Motorcycles
- Bikes above 350 cc
Super-Luxury Transport
- Yachts
- Private aircraft and helicopters
Other Sin or Luxury Goods
- Coal, lignite, peat
- Online gambling and gaming services
