Health experts: Hookah bars under scrutiny for allegedly evading GST and ‘sin tax’

Following the recent ban, hookah bars in Karnataka have come under scrutiny for evading GST and ‘sin tax’. Public health advocates said hookah bars have been exploiting a loophole in the GST system to avoid the prescribed 28% GST rate and a 72% cess, known as a “sin tax”, by serving hookah as part of their food and beverage offerings. 

This controversial practice has raised significant concerns among regulatory authorities and public health advocates.

While the Shisha Cafes and Restaurants’ Association has approached the court claiming that the ban has resulted in employment loss, public health advocates said their licences are for running restaurants and not hookah bars. Hence, there is no question of employment loss.

U.S. Vishal Rao, member of the State government’s High Power Committee on Tobacco Control, said the strategy employed by hookah bars involves presenting hookah as a component of food and beverages, thereby subjecting it only to a 5% GST rate.