Sin goods and sin tax
During revision of GST rates Finance Minister of India stated that the two-wheelers are neither a luxury nor sin goods and so, merit a GST rate revision. Two-wheelers currently attract 28% GST but now a rate revision proposal would be taken up by the GST Council.
Last year, the country’s largest two-wheeler maker Hero MotoCorp had urged the government to consider a phase-wise reduction in GST on the segment, starting with bringing bikes up to 150 cc into the 18% slab.
Sin Goods and Sin Tax
• A sin tax is levied on specific goods and services (Sin goods) at the time of purchase.
• These Sin good items receive the excise tax due to their ability, or perception, to be harmful or costly to society.
• Applicable items include tobacco products, alcohol, and gambling ventures. Sin taxes seek to deter people from engaging in socially harmful activities and behaviors, but they also provide a source of revenue for governments.
• Sin taxes are typically added to liquor, cigarettes, and goods that are considered morally hazardous. Because they generate enormous revenue, state governments favor
• Society accepts sin taxes because they affect only those who use sin taxed products or engage in sin taxed behaviors. When individual states run a deficit, a sin tax is generally one of the first taxes recommended by lawmakers to help fill the budget gap.
• A sin tax is a type of Pigovian tax, which is levied on companies which create negative externalities with their business practices. Sin tax proponents maintain that the targeted behaviors and goods produce negative externalities.
• Sin taxes are typically regressive taxes, meaning the less money a person makes, the more significant is the percentage of their income these taxes consume.