Sin Goods in GST: Meaning, Examples, List of Goods and Tax Rates

Sin goods in GST like SUVs, tobacco, carbonated drinks, online gambling and gaming, luxury or harmful items are subject to the highest tax of 28% plus cess. It is to reduce negative social or health impacts in India. To find out more, keep reading this article.

Key Takeaways-

The 56th GST Council meeting has announced important updates with changes effective from 22nd September 2025:

1. Sin goods (tobacco, pan masala, aerated drinks, smoking pipes, etc.) moved from 28% to 40%.
2. Luxury items (motor cars, bikes over 350cc, aircraft, yachts, revolvers/pistols) moved from 28% to 40%.
3. Casinos, race clubs, IPL events, bookmakers, and actionable claims now attract 40% GST with ITC.
4. Other non-alcoholic beverages moved from 18% to 40%.

*The above update is yet to be notified by the CBIC

What are Sin Goods?

Sin goods are those specific products that are harmful to society or individual health. It refers to tobacco, pan masala, gutka, cigarettes, aerated drinks, caffeinated beverages, coal, lignite, peat and luxury items. Sin goods are also known as demerit goods. The GST law treats these goods differently in India. Thereby, it attracts higher tax rates along with additional cess in many cases. 

The charge of a high GST rate is primarily to discourage the consumption of sin goods in India. Moreover, it also contributes to revenue for promoting public welfare. 

Sin Goods List

Sin goods under GST are given below-

Note: Alcohol, although a sin goods in general, is kept out of the scope of GST.

GST Rate Structure for Sin Goods

Sin goods under GST attract some of the highest tax rates, including:

• Standard GST rate of 28% on the sin goods.
• Additional compensation cess, ranging from 5-96%, is levied on top of GST.

This rate structure embodies the government’s approach to discourage consumption while maximising fiscal benefits.

Recent Developments and Reforms

The compensation cess is ending in March 2026. Following the PM's announcement of rate rationalisation on 15th August 2025, numerous news reports are now speculating about raising the previous 28% GST to a uniform 40% GST slab for sin goods, including cigarettes, high-end cars, and online gaming platforms. It is anticipated that the proposed GST reform will take effect by Diwali 2025. 

Rationale for Higher GST on Sin Goods

The reason for imposing higher GST on sin goods is to protect public health. Sin tax discourages citizens from consuming such products, leading to health issues, addiction, and social problems. 

The government aims to reduce the negative impact of sin goods while also generating additional revenue. It is made possible when these goods are priced higher. 

Impact of Sin Goods Taxation

The taxation of sin goods under GST results in:

• Increased operational and compliance costs for businesses in sin goods.
• Higher retail prices can discourage excessive or harmful consumption by consumers.
• Enhanced government revenues through GST and compensatory cess collections, supporting public welfare.
• Fluctuations in market valuations for stocks related to sin goods due to regulatory and tax uncertainties.
• A balancing act between public health goals and economic interests under the evolving GST reform environment.

This ensures that sin goods taxation under GST is both a fiscal tool and a public health strategy.