Since August last year when the resolution to implement GST was passed, the common man is preparing himself for the regime and is eager to learn the implications of GST on his lifestyle, what products will be cheaper and the things for which, he will have to shell out more money.
The implementation of GST is the biggest ever tax reform in the country, which will ease doing business in India by removing operational hindrances caused due to multiple levies under the current tax structure. With the introduction of the one tax – one country system, goods can move freely from one state to another. No more long waiting hours at state borders, or filling numerous forms, the central and state sales taxes and duties will all be replaced by GST, resulting in operational efficiency and reduced logistics’ costs.
GST has been propagated as a reform to simplify the tax structure while protecting the common man’s interests. Therefore, taxes on most essentials will be cut significantly, there will be zero taxes also on some items whereas luxury goods are targeted and will be taxed on the higher side. There are five tax slabs under the GST arrangement 0%, 5%, 12%, 18% and 28%, and all products and services will fall under either of the five brackets (excepting a few, like gold)
The time has finally come, and GST will be implemented in a week’s time. So, at this point we have brought for you a snapshot of the impact of GST on your pocket.
Daily consumption Products: table Various consumer goods that we buy on a daily basis, hold the lion’s share in our monthly budget. A snapshot of GST rates on various daily consumption products:
| NIL | 5% | 12% | 18% | 28% |
| Fresh fruits and vegetables | Frozen vegetables and fruits, Cashew Nuts | Butter, Ghee, Cheese, Packaged dry fruits | Preserved Vegetables | Chocolates without cocoa, Chocolate covered wafers |
| Cereals, Pulses, Atta, Salt | Tea, Coffee, Spices, | Sauces, Namkeens, Pickles, instant food mixes | Biscuits, Pasta, Cornflakes, Cakes, Pastries | Chewing gums, Molasses |
| Fresh Milk, Curd, Butter milk, Natural Honey | Branded Paneer, Milk powder, | Tinned juices | Jams, Soups, Ice creams, Mayonnaise and other gourmet items | Pan Masala |
| Fresh Chicken, Eggs and several other daily consumption items | Packaged foods | Frozen meat products, Sausages | Mineral water | Aerated water |
On the whole, essentials among the daily consumption items will attract lower tax, and hence will become cheaper whereas processed food items will inflate the cost.
Mobiles & Computers: Mobile phones will attract a 12% tax, plus a 10% basic customs duty may be levied on imported mobiles, so overall the device will be expensive than before. Mobile phone bills and data packs will also contribute to the misery, as until now a 15% Service tax was applicable on these services which will now increase to 18% under GST. Cost of Laptops and Desktops will also increase as they will attract an 18% GST from July 1 as against the current 15%.
Travel: As the government is following a progressive taxation approach, hotels with a tariff of less than Rs 1,000 fall under the 0% slab, AC hotels, under the 18% slab and luxury hotels in the 28% slab. Similarly, economy travel by trains (all classes) or by Air will bear 5% tax, while for business class air tickets, you will have to pay a 12% GST.
Restaurant bills: For the connoisseurs, who love eating at fine dines, there is good news. Food in all air-conditioned and five star restaurants will attract an 18% tax as against the current 20-24%. For Non AC Restaurant food bills, you have to pay a 12% GST.
Movies: On movie tickets priced above Rs 100, you will have to pay 28% tax. In some states, the service tax on movie tickets is skyrocketing, the 28% tax slab will be a sigh of relief for cinema lovers. Whereas in other states, where the service tax was lower, movie watching will become dearer.
Gold Jewelery: There is no difference in the tax incidence on gold, as gold will attract a 3% GST and previously VAT and excise duty on gold summed to 3%. The difference lies in making charges, which would attract an 18% GST as against NIL earlier. So, if you are planning to buy Gold jewelery, do it now.
A favourable incidence of GST implementation for the common man is pre-GST clearance Sale. Online shopping websites as well as retail outlets are offering huge discounts on apparels, footwear, electronics, appliances, etc., with a view to clear their stocks before the implementation of GST. Carmakers are also offering delectable discounts to clear their inventory. So, if you are planning to buy any of these products in the future, you can encash the discount opportunity and buy now.
Another favourable by-product of GST is job creation. Companies need to get their accounts in place, so there is a greater demand for professionals versed with GST laws. Lawyers, CA’s, accountants, IT guys for synching the tech platform of companies with new laws, are in huge demand these days. The tax base is also expected to broaden, with an increased number of small businessmen falling under GST regime, again leading to an increase in the demand for accountants.
To sum up, it is expected that as an immediate impact of GST, there may be a rise in the inflationary pressure, however in the long run, the adverse impact on various sectors will be neutralized. Until now goods and services were taxed separately, so a businessman who was paying VAT as well as service tax, could not set off his service tax cost against the VAT paid, and vice-versa, thus increasing the cost of his offering. And this amplified cost was then passed on to his ultimate customer. However GST envelopes the entire universe of goods and services, excepting a few sectors, so this businessman can now avail input tax credit for the GST paid on services against GST paid on goods, or otherwise. Due to this flexibility, the cascading effect of taxes will be wiped out, the cost would decrease, and the benefit of which, will be transmitted to the consumer. So, eventually the cost of all products and services will alleviate for the end customer in times to come.