The 56th meeting of the GST Council held in New Delhi, chaired by Finance Minister Nirmala Sitharaman, announced the new tax rates, which will be effective from September 22, 2025. The existing four slabs (5%, 12%, 18%, 28%) have been replaced by two basic slabs (5% and 18%), while a new slab of 40% has been added for luxury and unhealthy goods (sane goods). However, the implementation of the 40% rate on tobacco-related products has been deferred until the repayment of loans. This will make luxury vehicles, beverages, and online gaming expensive, while common goods will be cheaper. Items affected by the 40% slab The new 40% GST slab will apply to a limited but specific range of items, including: Unhealthy products: Pan masala, cigarettes, bidis, jaggery, chewing tobacco, and carbonated beverages (such as Coca-Cola, energy drinks). Online gaming: Reclassified as a demerit good, which will now come under the 40% tax bracket. Luxury vehicles and motorcycles: Vehicles with engines above 1500 cc and a length of more than 4000 mm (SUVs, MUVs, MPVs), and motorcycles larger than 350 cc (such as Royal Enfield Cruiser). Other luxury items: Yachts, helicopters, and High-end products, valued at more than Rs 50 lakh. This rate will be levied on the retail price (RSP) of pan masala and tobacco, which will significantly increase their prices. The Finance Minister clarified that the existing 28% tax and compensation cess on tobacco products will continue till the repayment of the arrears, after which the 40% rate will be applicable. Date of implementation and economic impact The implementation of the 40% slab, especially for tobacco products, will be after the repayment of the compensation cess arrears, the final date of which will be decided by the Finance Minister and the GST Council. On other items, this rate will be effective from September 22, 2025. According to experts, this will reduce the consumption of unhealthy products, but there could be a potential loss of Rs 48,000 crore to the government revenue. However, the lower rates will increase the purchasing power of consumers, which will boost economic growth. Prime Minister Narendra Modi called it a ‘Diwali gift to the people’ and said: ‘These reforms will make the life of the common man easier.’ The BJP spokesperson wrote on X: ‘The 40% slab will not only discourage harmful items but also stabilize the economy.’ ‘These changes will bring relief to the common man and strengthen the economy.’ "— Nirmala Sitharaman References India Today, The Hindu, Times of India, Clear Tax, Indian Express, X-Post