Income Tax

GST and the Impact on Consumers

While the Goods & Services Tax is a transformational structural reform which will have multiple benefits, there is the usual chaos when there is a major change from the existing systems. Here is a small example which makes GST extremely simple to understand for everyone.

The long-term benefits of the creation of a national market; enhanced ease of doing business; greater productivity & efficiency; and improved tax compliance are totally worthwhile to go for.

As consumers we need to understand that the Goods and Services Tax (GST) is an indirect tax, that is, it is a tax levied on the consumption of goods and items, versus a direct tax that is levied on income.

The advantage is that it replaces all the central and state taxes, such as excise duty, service tax, sales tax, with a single tax structure. While in principle GST is meant to be a single tax, in India it’s actually a dual tax – Central GST and State GST and then there’s Integrated GST on the inter-state supply of goods and services.

We, as consumers, are worried about the impact of GST on our monthly budgets and other expenses.

Daily use products like soap, toothpaste etc. will cost less. Economy class air travel, traveling by cabs is getting cheaper under GST regime. Similarly, medicines would cost less. Prepaid phone charges, movie tickets and e-commerce transaction will cost more.

You may be already knowing that the GST slabs are pegged at 5%, 12%, 18% & 28%. The tax structure announced as yet for common-use goods are as under:

GST Rates Structure

Tax Rates Products
0% Milk, Eggs, Curd, Lassi, Honey, Unpacked Foodgrains, Unpacked Paneer, Gur, Unbranded Natural Honey, Fresh Vegetables, Salt Education Services, Health Services, Children’s Books, Unbranded Maida, Besan, Prasad, Palmyra Jaggery, Phool Bhari Jhadoo
5% Sugar, Tea, Edible Oils, Domestic LPG, PDS Kerosene, Cashew Nuts, Milk Food for Babies, Fabric, Life saving drugs, Spices, Mithai Packed Paneer, Coal, Raisin, Roasted Coffee Beans, Skimmed Milk Powder, Footwear (< Rs.500), Apparels (< Rs.1000), Coir Mats, Matting & Floor Covering, Agarbatti
12% Butter, ghee, Almonds, Fruit Juice, Packed Coconut Water, Fruits, Nuts or other parts of Plants including Pickle Murabba, Chutney, Jam, Jelly Processed food, Mobiles, Preparations of Vegetables, Umbrella
18% Hair Oil, Soups, Toothpaste, Soap, Pasta, Corn Flakes Capital goods, Printers, Industrial Intermediaries, Ice-cream, Toiletries, Computers
28% Small cars (+1% or 3% cess), Consumer durables such as AC and fridge High-end motorcycles (+15% cess), Luxury & sin items like BMWs, cigarettes and aerated drinks (+15% cess)

Here’s wishing that all stakeholders work together for a seamless transition to this new paradigm. This reform will result in benefits for all participants in the Indian economy, including both businesses & consumers.

Read more about GST here which talks about how GST rates in telecom and cinema was a pleasant surprise for consumers.

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