MoF Notifies New Tax Structure for ‘Sin Goods’ from February 1, 2026

Current Context: The Ministry of Finance (MoF) has notified a new tax structure for ‘sin goods’ such as tobacco, cigarettes, pan masala, and gutkha, effective from February 1, 2026.

• These products will now attract higher GST rates along with additional excise duty and health cess, making them more expensive.
• Cigarettes and pan masala will be taxed at 40% GST plus cess, while biris remain at 18% GST.
• Other items like chewing tobacco and gutkha will also face stricter excise rules.
• This move comes after the end of the GST compensation cess regime, shifting focus to new excise and health-based levies.
• The aim is to discourage consumption of harmful products while boosting revenue for health and social welfare programs.
• Overall, consumers will face sharp price increases on sin goods from Feb 1, 2026.

Question:

Q.1 What is the new GST rate on cigarettes and pan masala under the revised tax regime?
a) 28% GST only
b) 40% GST only
c) 40% GST plus cess
d) 28% GST plus excise

Answer: c) Cigarettes and pan masala are now taxed at 40% GST plus additional cess.