New 40% GST slab: What you’ll pay more for and why

Your favourite fizzy drink or the superbike you’ve been eyeing just got costlier. Under the new Goods and Services Tax (GST) structure, the government has introduced a new 40% slab for sin and ultra-luxury goods, while slashing rates for most essentials.

What Are Sin Goods?

Sin goods are products considered harmful to health or society. These include:

• Tobacco, gutka, and pan masala
• Sugary and aerated drinks

The higher tax rate is aimed at discouraging consumption of such products.

What Falls Under the 40% Slab?

Along with sin goods, the new 40% tax also applies to luxury items such as:

• Luxury cars and superbikes
• Yachts and racing cars
• Gambling activities

Earlier, these were taxed at 28% plus a compensation cess. Now, the cess has been scrapped and merged into the single 40% slab.

Alcohol Kept Out of GST

Alcohol continues to remain outside GST. Instead, it is taxed by state governments, with levies varying across states. Taxes can account for up to 80% of the cost, according to the International Spirits and Wines Association of India.

Essentials Get Cheaper

While indulgences cost more, everyday items have become more affordable. The government has reduced the previous four tax rates (5%, 12%, 18%, and 28%) into just two—5% and 18%. This has brought down prices of 99% of daily-use items including:

• Groceries and FMCG
• Medicines and agri-equipment
• Clothing and automobiles
• Electronics like TVs and smartphones

In total, 375 items have seen price cuts.

Impact on Consumers

Finance Minister Nirmala Sitharaman visited Delhi’s Laxmi Nagar market, where shopkeepers confirmed reduced prices on stationery and other essentials, directly benefiting students and parents.

Prime Minister Narendra Modi has termed the reform a “GST Bachat Utsav”, highlighting that along with the Budget’s income tax exemption hike to ₹12 lakh, household savings could rise by ₹2.5 lakh crore.

According to government estimates:

• Household bills for groceries and essentials may reduce by 13%
• A small car buyer could save up to ₹70,000

Bottom Line

The GST reform is designed to boost consumption and ease the cost burden on households. But while your monthly grocery bill and daily essentials get cheaper, indulging in sin or splendor from fizzy colas to superbikes—now comes with a heftier price tag.