You love the good things in life. Parties, eating out in restaurants, those lovely aerated beverages…..Now, all the good things in life could get expensive after July 1st. The reason….Goods and Services Tax, popularly called GST. The Lok Sabha passed 4 GST Bills on March 29th. Central goods and services tax (CGST) bill, the integrated goods and services tax (IGST) bill, the goods and services tax (compensation to states) bill, and the Union territory goods and services tax (UTGST) bill.
So what is this GST? GST is a value added tax, charged on manufacture, sale and consumption of goods and services, across the Nation. It is a single indirect tax for the whole Country. GST will replace all other indirect taxes which are charged by the State and Central Government. It is believed to be the biggest reform since India got her independence.
So how will GST affect your everyday life? Let’s find out. Find Tax Planning difficult? We at IndianMoney.com website. IndianMoney.com offers Free, Unbiased and on-call financial advice on Insurance, Mutual Funds, Real Estate, Loans, Bank Accounts and capital markets.
What are the GST slab rates?
The GST council has proposed to have 5 tax slabs - 0%, 5%, 12%, 18% and 28%. Which goods and services land up in which tax slab is yet to be decided. GST is a mixed bag. Some items could get costly and some items cheap after GST.
There will be no tax on rice, wheat and many essential items, which constitute 50% of the CPI inflation basket. You can expect 0% tax on food grains, milk, vegetables and essential medicines.
GST has proposed a lowest tax rate of 5% for items of mass consumption. You and other citizens buy spices, tea, coffee and edible oils. If these items fall in the 5% slab, you can expect prices of items of mass consumption to fall.
See Also: GST Tax Rates In India
3. Prices of these items could fall after GST
Expect the prices of fans, water coolers, water heaters, LED TV’s and some electronic items to fall. Your favorite shampoo and chocolates could just get cheaper. Your favorite branded clothes could get cheap. Love to go to the movies? The price of that movie ticket could just get a little cheaper. Expect the prices of two wheelers and entry level cars to go down. There’s something for digital India and financial inclusion. Expect the price of Point of Sale (POS) machines and fingerprint scanners to go down.
What about renewable energy? Solar panels used in solar equipment could get cheap. Solar power could get a real big boost. The Prime Minister is promoting affordable housing in India. Affordable housing has been given infrastructure status which means investments could pour in. Expect the prices of cement and paint to fall.
What could be the reason for this fall in price? These goods and items could fall in the 12% or 18% GST slabs. Currently manufactured consumer goods are heavily taxed under VAT (value added tax) and excise duty. A lower tax could mean these items get real cheap.
These items and services could get costly after GST
1. Dining and eating out could get costly
Eating out in restaurants could get really expensive after GST. Let’s take the case of Karnataka. Restaurants in Karnataka pay 4% composite tax. This money is not collected from you and other citizens who eat at the restaurants.
After GST, restaurants with an annual turnover of up to INR 50 Lakhs, will fall in the 5% GST slab. The other eateries and restaurants could fall in the 12% or 18% GST slab. These taxes will be passed to you…The Consumer…as GST is a destination based tax.
2. Prices of these items could rise after GST
Mobile bills and internet packs, air travel, cab services, DTH and cable services, insurance premiums and online shopping could get costlier after GST. Why is this so? These are services which have a service tax rate of 15%. After GST, these services could land in the 18% slab, making them costly.
3. Cigarettes and luxury goods could get costly
The price of cigarettes, pan masala, aerated drinks, tobacco and luxury cars could go up after GST. These items could fall in the highest GST tax slab of 28% making them quite costly.
Let’s end with a small brief on the benefits of GST. India becomes a single market, reducing time and cost on movement of goods. The Government gets more tax revenue and the industry….lesser taxes. No wastage of time on unnecessary paperwork. The GDP could rise by around 2%. Exports could really take off.
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