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Sin goods and sin tax

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    28th Aug, 2020
  • Finance Minister recently said that two-wheelers are neither a luxury nor sin goods and so, merit a GST rate revision.
  • Sin goods are goods which consider harmful to society.
    • Example of sin goods: Alcohol and Tobacco, Candies, Drugs, Soft drinks, Fast foods, Coffee, Sugar, Gambling and Pornography.
  • Sin Tax is placed on goods that adversely affect health, most notably tobacco and alcohol.
  • Three principal arguments are used to justify this type of taxation:
    • It can reduce consumption through increased prices.
    • Compensate society for things like increased health system costs.
    • Increase resources for the health sector.
  • According to the current GST rate structure, some of the sin goods that attract a cess include cigarettes, pan masala and aerated drinks
  • Countries such as the UK, Sweden and Canada impose Sin Taxes on a series of products and services, from tobacco and alcohol to lotteries, gambling and fuel, which chip in with sizeable revenues.