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GST 2.0 proposal: Reports of 40% tax on luxury & Sin goods hit tobacco, gaming stocks

Prime Minister Narendra Modi's announcement of GST 2.0 reforms could lead to 40% tax on luxury and sin goods. The reports impacted stocks of tobacco and online gaming companies on Monday. The new structure could include rates of 0%, 5%, 12%, 18%, and a 40% luxury/sin tax.

Proposed GST 2.0 Tax Slabs and their impact
Proposed GST 2.0 Tax Slabs and their impact Credit:Constantine Johnny Moment Getty Images
| Updated on: Aug 18, 2025 | 01:00 PM

New Delhi: With reports suggesting that a special 40 per cent tax rate is being considered for luxury and sin products, tobacco and online gaming stocks were hit on Monday. The reports emerged after Prime Minister Narendra Modi announced next generation of reforms under GST, which he said would bring relief to the common man, farmers, middle class and MSMEs.

After announcing the proposal during his Independence Day speech, PM Modi said the Centre has circulated the draft of the next-generation GST reforms among states and appealed to them to cooperate so that it could be implemented before Diwali.

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Meanwhile, reports stated that pan masala, tobacco, cigarettes, luxury cars, and online gaming could be placed in the top slab rate.

The stocks of VST Industries, ITC, and Godfrey Phillips traded lower on Monday. The gaming stocks, including Nazara Technologies Ltd and Delta Corp Ltd, were also hit.

Proposed GST 2.0 Tax Slabs and Their Impact

PTI mentioned that if the GST reforms proposal is implemented, about 99 per cent of products which are currently placed in 12 per cent are likely to be moved to the 5% bracket. It also mentioned that 90% of taxable goods in the existing 28% slab are expected to be placed under the 18% category.

The news agency quoted sources saying:

  • Nil or zero per cent GST could be in store for essential food items
  • 5 per cent tax rate could be implemented on daily use items
  • 12 per cent tax could be levied on standard goods
  • 18 per cent GST on electronics and services
  • 28 per cent on luxury and sin goods

The revamped GST regime could have two slabs plus a special rate of 40 per cent for luxury and sin goods.

Commenting on the announcement by PM Modi regarding GST 2.0, experts described it a timely and strategic move to build a resilient Indian economy.

"The Prime Minister's vision for GST 2.0 is a timely and strategic move to build a resilient Indian economy. These are not merely procedural changes; they are essential structural reforms designed to mitigate the risks arising from global trade tensions. By addressing the inverted duty structure, we are unlocking crucial working capital and making our exports more competitive on the global stage," said Saurabh Agarwal, Tax Partner, EY India.

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