New Delhi: When the Goods and Services Tax (GST) came into effect on 1 July 2017, it replaced a maze of central and state indirect taxes with a single, streamlined system. Under the GST framework, goods and services fall into five main slabs—0%, 5%, 12%, 18%, and 28%. The 28% slab stands at the very top, reserved for luxury items, premium goods, and products deemed harmful to health.
In many cases, the 28% GST is paired with an additional cuss, further pushing up prices, especially for items such as tobacco and luxury vehicles.
What Falls Under the 28% GST Slab
The highest GST slab is applied to non-essential, luxury, and harmful products.
Goods in this category include:
- Automobiles: Luxury cars, SUVs, and high-performance bikes above 350cc.
- Consumer durables: Premium air conditioners, large-capacity refrigerators, high-end washing machines.
- Tobacco products: Cigarettes, cigars, chewing tobacco (with additional cess).
- Luxury goods: Expensive furniture, crystal ware, premium watches.
- Beverages & confectionery: Aerated drinks and energy drinks.
Services taxed at 28% include:
- Entertainment: Cinema tickets priced above ₹100.
- Gambling & betting: Casinos, race clubs.
- Luxury recreation: Certain amusement and theme parks.
Why the 28% Slab Exists
The GST Council uses the 28% slab for three main reasons:
- Revenue from Non-Essentials: Since luxury and sin goods aren’t daily necessities, the government can tax them heavily without hurting essential consumption.
- Discouraging Harmful Habits: High taxes on products like tobacco and sugary drinks aim to curb their use.
- Progressive Taxation: Wealthier consumers who buy luxury goods contribute more to public revenue.
How Consumers Are Affected
- Luxury goods: Prices rise steeply. A car worth ₹20 lakh before tax could cost ₹25.6 lakh after GST—excluding cess.
- Sin goods: The combined GST and cess can push cigarette tax rates above 60%, making them significantly more expensive.
Impact on Businesses
Companies in the 28% bracket often operate in niche, high-end markets.
Advantages:
- Stable policy makes it easier to market products as premium and exclusive.
- Predictable pricing in the luxury sector.
Challenges:
- Reduced domestic demand due to high prices.
- Increased risk of grey market imports.
- Luxury car sales have notably slowed since GST’s introduction.
The Extra Hit: GST Cess
For certain products, the 28% GST is topped up with a cess:
- Tobacco products: Cess varies by type and size.
- Aerated drinks: Additional 12% cess.
- Luxury cars & SUVs: Cess ranging from 1% to 22%, depending on engine capacity and model.
The cess revenue compensates states for GST-related revenue losses.
Recent GST Council Decisions
Some items have been shifted out of the 28% category to ease tax burdens:
- Cinema tickets above ₹100 now taxed at 18%.
- Paints and varnishes moved to 18% to aid the housing sector.
- Select auto parts reduced to 18% to support manufacturing.
Tobacco and luxury vehicles, however, remain firmly in the top bracket.
Ongoing Challenges
- Shrinking customer base for high-end goods.
- Risk of smuggling and under-invoicing.
- Price disadvantage in border states compared to imports.
- Deterrent effect on luxury tourism.
The Road Ahead
Tax reforms under discussion could reshape the 28% slab:
- Restricting it mainly to sin goods.
- Using higher cess rates instead of a flat high GST for harmful items.
- Potentially lowering taxes on luxury cars to boost sales.
Conclusion
The 28% GST slab is both a fiscal and social policy tool—raising significant revenue while discouraging harmful consumption. While health-impacting products like tobacco are likely to stay in this bracket, the future may see luxury goods moved to lower slabs to stimulate growth.