One of the biggest and most powerful tax reform after independence is nearly coming to reality i.e. GST – Goods and Service Tax. Let’s see how GST is linked to every individual’s life and how it will impact our financials. As of now, common man has to pay various taxes including varying state related tax on the goods or services purchased. This includes tax paid by the manufacturer and the end user i.e. consumer.
Firstly the manufacturer of the products has to pay central tax such as excise duty, octroy etc. and post that consumer pays tax on the items purchased which includes VAT, service tax etc. This straight away increases the prices of goods or services. If GST gets implemented, there will be end to such multiple taxes and instead there will be a single tax with a specified rate across the country.
Listed below are few basic necessities which are expected to become costly once GST gets implemented across India on 01st April 2017.
- Insurance premium: Although insurance is considered to be the most important part of life, the same will become costlier. This is because service tax will be included in the GST. So an addition of 3% will put a burden on the policy holder’s wallet.
- Mobile phones and laptops: Duty on manufactured goods is set to rise from existing 14%-15% to 18%. Because of this, the two most widely used gadgets in India mobile phones and laptops are set to become expensive.
- Hoteling: Spending money in hotels is going to become dearer as service tax will be included in the GST. So instead of 15% tax, you will have to shell out an additional 3% tax i.e. total of 18% on your hotel bill.
- Alcohol & Cigarettes: Although in every budget cost of cigarette becomes rises, the impact of GST will further add to its cost. This includes alcohol as well. There is a component called Sin Tax in GST which is proposed at 40% in the Goods and Service tax bill.
- Airtickets: Tax rate on domestic and international flights is set to increase. This is expected to double. So this will straight away increase the price of your flight tickets.
- Telephone Bills: Call charges and data usage charge will increase. This too will rise as 18% GST rate will be replacing the existing service tax of 15%.
- Food items: Packaged food items.
- Other things which are set to become costlier are gems and jewelries, branded clothings, online shopping and most importantly medicines. Check out how to get cheapest medicines in India.
What will become cheaper with GST?
As you can see above, your household budget is set to rise although for a short period but there are certain FMCG products which will become cheaper. This includes:
- Buying home
- Purchasing vehicles as on road price is estimated to drop by nearly 8%.
- Electrical appliances such as air conditioner, celing fan, microwave oven, fridge.
- Movie tickets: As there will be a reduction of tax between 2%-4%, price of tickets is set to reduce.
But make a note that – GST is a new financial concept and there is less clarity especially to the service industry as to how they will have to pay GST. Also GST rate is yet to be finalized and it is expected to be around 18%.
Although basic things are set to become expensive in the short term. But in the long run things will become cheaper and will benefit consumer.