Finmin has imposed “sin tax” for Alcohol and tobacco industries under the proposed GST structure that seeks to bring in a uniform indirect tax regime across the country. The rate of tax has not been specified yet.
What is sin tax?
It is an excise tax that is levied on products and services considered to be bad for health or society such as alcohol, tobacco and gambling. Sin tax is a globally prevalent practice under which sin industries like alcohol and tobacco attract higher rates of tax.
Benefits of sin tax
These additional taxes are seen as efforts to discourage people from use of unhealthy products or services.
- Government can use these taxes to political advantage as they can say they are placing the taxes to act as an incentive to stop smoking or stop excess alcohol consumption.
- Higher the sin tax means higher government revenues as these are the products which will always be consumed.
Finance Ministry is currently seeking inputs from the industry and other stakeholders at national, state and local levels on the Goods and Services Tax (GST) law meanwhile Govt is undertaking the preparatory work necessary for GST implementation, which will subsume various taxes like excise, service tax, sales tax, octroi, etc. and will ensure a single indirect tax regime.