GST or Goods and Services Tax is applicable on the supply of goods and services. It will merge the oh-so-many taxes such as VAT, Excise, CST, Service tax, Entertainment tax, etc. under one banner bringing:

  • uniformity in the taxation system across the country,
  • removing cascading effect,
  • allowing full input tax credit to be set off against output liability, and
  • introducing standard rates of 5%, 12%, 18% and 28%.

France was the first country to implement GST to reduce tax evasion. Since then, more than 160 countries have implemented GST with some of them like Canada, Brazil and now India adopting a Dual GST model.

WHO WILL HAVE TO PAY GST?

GST will be paid by all manufacturers, sellers as well as service providers. However, being an indirect tax, the ultimate bearers will be me, you and the end consumers who keep a penny to expend. So let’s see the impact on such individuals.

WHAT HAPPENS WHEN MY MOM GOES OUT TO BUY ARTICLES OF EVERYDAY USE?

These are generally items of mass consumption which are essential in day to day life- grocery, cosmetics, food grains, jewelry etc. These things will cause a duty demand of 5 percent, keeping it sufficiently low for the utilization levels to stay enduring in spite of the higher evaluating. A portion of the very basic ones, for example, drain, curd, rice, dal, wheat being excluded from the domain of GST.

ITEMS RATE BEFORE GST RATE AFTER GST  INCREASE/ DECREASE
Spices, salt, tea, edible oil 8% 5% 3% Decrease
Hair oils, soaps, toothpaste 22-24% 18% 6% Decrease
Life-saving drugs/other medicines 5% 5/12% 7% Increase
Milk and curd 5% Exempt 5% Decrease
Foodgrains 5% Exempt 5% Decrease
White goods* 23-25% 28% 3% Increase
NET INCREASE/ DECREASE     9% Decrease (Approx.)

*Definition of White Goods as per Business Dictionary, “Heavy consumer durables such as air conditioners, refrigerators, stoves, etc., which used to be painted only in a white enamel finish. Regardless of their accessibility in changed hues now, they are still called white merchandise.”

HOW  WILL GST IMPACT THE WALLET OF YOUTH?

Here is a portion of the essential things of products and ventures devoured by individuals matured between 18-25, recreational exercises and innovation being the crescendo consumption pulls in standard rates of GST, for example, 18% or 28%.

 ITEMS RATE BEFORE GST  RATE AFTER GST  INCREASE/ DECREASE
Movie tickets 35-40% 28% 10% Decrease
Cell phone 12.8% 18% 5% Increase
Eating out in restaurants 18.5% 18%* .5% Decrease
Phone bills 15% 18% 3% Increase
Readymade garments 12.5% 12% .5% Decrease
Shampoo, chocolates and instant coffee 24% 28% 4% Increase
Aerated drinks 40% 28% 10% Decrease
Renting of Cab 6% 5% 1% Decrease
NET INCREASE/DECREASE     8% Decrease (Approx.)

*Non-AC restaurants will charge 12% GST. The rates for AC restaurant and the ones holding liquor license will be 18%, while 5-star hotels will charge 28%. But those having a turnover of Rs 50 lakhs or below will go under the 5% category.

E-commerce sites such as Amazon, Flipkart, Snapdeal etc., will have to pay TDS (Tax deducted at source) at the same time. So e-commerce companies will see a shrinking of profit margins and increased tax compliance which may cut the discounts & freebies that they offer.

BURDEN OF GST ON THE MAN OF THE HOUSE

While the burden falls on the shoulders of the man in most of the middle to high-income families, these items are used widely across the country. Most services that are currently being taxed at the rate of 15 percent are likely to undergo a price hike and will be added to the current 18 percent of the standard rate of GST whereas education and healthcare services continue to be exempt.

ITEMS RATE BEFORE GST RATE AFTER GST INCREASE/ DECREASE
Television 23-25% 18% 7% Decrease
Train Travel* 4.35% 5% 1% Increase
Cars**/automobiles 27% 28%** 2% Increase
Financial services 15% 18% 3% Increase
Electricity bills (coal) 11.7% 5% 7% Decrease
Economy class air travel 6% 5% 1% Decrease
Business class air travel 9% 12% 3% Increase
Renting of hotel*** 15% 18% 3% Increase
Insurance services 15% 18% 3% Increase
NET INCREASE/ DECREASE     Approx. NIL

*Non-AC train travel is exempt, including local trains and metros, and no service tax on tickets booked through IRCTC.

**Plus an additional 3% cess for small diesel cars, 1% cess for small petrol cars, and 15% cess for luxury cars.

***Per day tariff of Rs 1,000 will be exempt, Rs 1000-2500, would be 12%, Rs 2500-5000, would be 18%, and above Rs 5000 would be 28%.

THE ULTIMATE TRAGEDY WITH “SIN GOODS”

Sin tax is a globally prevalent practice under which products like cigarettes, tobacco products, and aerated drinks attract higher rates of tax. The Government has a negative approach towards sin goods and tax higher rates than normal, which is actually good news if you have been planning to live sans sins.

SIN GOODS RATE BEFORE GST RATE AFTER GST
Alcohol for human consumption 60% Outside the ambit of GST
Cigarettes 53% 28% + Cess 290% Ad valorem
Tobacco 70% 18% + Cess 290% Ad valorem

 

Although the immediate effect of GST seems likely to bring happy faces with a net decrease in expenses when it boils down to the family as a whole, GST is still a bag full of multi-colored items with some of the necessities becoming cheaper, while the others getting more expensive. Though in the longer run the GST might have a favorable effect on most of the sectors of the economy, but as far as the short run is concerned, its perks seem to have limits. In light of the past experience of GST in different nations, India will watch an inflationary side, which will blur away once the enactment soaks in.

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Author: Sargam Palod

Compassionate, perseverant and adventurous (almost all the times). Also, I revel in reading, traveling, Irish coffee and learning something new every day.

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