GST : Know what will get cheaper & costly

Article from The Financial Express

GST launch in India: The Goods and Services Tax (GST), one of India's biggest reform in tax structure will, at last, become a reality from July 1. The tax reform will be launched tonight when the clock strikes 12 on June 30, and the Goods and Services Tax will irreversibly impact the price of all kinds of products. GST will change the indirect tax landscape of India from tomorrow, subsuming various state and central taxes. Though the real impact of the government's big-bang reform can be assessed only after a full year of its implementation, let us gauge the immediate impact on the prices of various products. In many cases, it may weigh heavily on your pockets while in others it may soothe your frayed nerves.

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     Image Courtesy:Business Standard

The GST Council has bracketed all the goods and services in the country in five categories - 0 per cent, 5 per cent, 12 per cent, 18 per cent and 28 per cent. While some of these products had higher effective tax rates before the GST and the new tax regime will reduce the burden on consumers, some of the items will now be taxed at higher rate. While 7 percent of the items come under the exempted list, 14 per cent fall in the 5 percent tax slab, 17 per cent in the 12 per cent slab, 43 per cent under 18 per cent tax rate and only 19 percent of the items will fall under the highest 28 per cent tax slab in the new regime.

What gets cheaper? What gets costlier?

  • Food
Cheaper under GST: Government has exempted tax on most of the food items. Similarly, many will come under the low tax category of 5 percent or 12 percent. Unpacked foodgrains, unbranded atta, maida, besan, fresh vegetables and fruits, and salt have been exempted from tax. Even most of the processed food items will come under the 5 percent tax bracket. In terms of restaurants, eating out at small restaurants will also cost less after implementation of GST, since those earning less than Rs 75 lakh in a year have been placed in the 5 percent tax bracket under the new GST rates.

Costlier under GST: Tax on tea and coffee has been increased from 3-4 percent to 5 percent. In terms of restaurants, fine dining restaurants or those inside five-star hotels will now get pricier.

Cheaper under GST: Soaps, hair oil and toothpaste will become cheaper at 18 per cent tax, as previously they were taxed at 24-28 percent.

Costlier under GST: Shampoos and deodorants will be more expensive post-GST.

  • Travel
Cheaper under GST: Airfares for economy class travel are expected to go down under the GST, as such tickets have been placed in the 5 percent tax bracket under the GST.

Costlier under GST: Airfare for business class and train tickets will cost more as they have been placed under the 12 percent tax bracket.

  • Automobiles
Cheaper under GST: Bikes or scooters with engine capacity below 350 cc, some categories of commercial vehicles including three-wheelers, SUVs will get cheaper under the GST. The tax rate varies from segment to segment.

Costlier under GST: Bikes which have an engine capacity of over 350 cc and autos will get pricier when the GST is implemented.

  • Household items
Cheaper under GST: Household items such as pressure cookers and pans will get cheaper as they will be taxed at 12 per cent GST rate, much less than the current 19.5 percent rate.

Costlier under GST: Taxes on home appliances and consumer durables such as TVs, refrigerators, ACs, or washing machine has been increased from 23-28 percent (different in various states) to 28 percent now.

  • Movie tickets
Cheaper under GST: Tickets that cost less than Rs 100 will get cheaper in most states with a new rate of 18 percent. Most states charged 25-30 percent tax on movie tickets.

Costlier under GST: Movie tickets above Rs 100 will cost more with 28 per cent GST.

  • Hotels
Cheaper under GST: The effect of GST on hotels will vary from segment to segment. However, non-luxury hotels and hotels with tariffs of less than Rs 7,500 are expected to get cheaper.

Costlier under GST: Hotels that serve liquor and hotels with room tariffs between Rs 2,500 and Rs 7,500 will now fall under 18 percent tax slab. Hotels which have room tariffs over Rs 7,500 will now fall under 28 per cent GST.

  • Other Items

Cheaper under GST

1. Clothes and Shoes: Footwear and Apparels will come under tax slabs ranging from 0 to 18 per cent. Most of such items will get cheaper under the GST.

2. With 81 per cent of items falling under below 18 percent tax rate, certain goods that will become cheaper are salad dressings, mayonnaise, weighing machinery, static converters (UPS), electric transformers, and winding wires.

3. Postage or revenue stamps will also become cheaper as GST on these has been reduced to five per cent.

4. The tax rate on cutlery, ketchup, sauces and pickle under GST will likely become cheaper as they will be taxed at 12 percent.

Costlier under GST

1. Services: Courier services, mobile phone tariffs, insurance premiums, banking charges, broadband services will get costlier as they will come under the 18 percent tax bracket. Earlier there was a service tax of 15 percent on such services.

2. Sin products: Taxes on aerated drinks, tobacco and luxury goods will now come under the 28 percent tax bracket under GST, so it will get costlier.

3. Mobile bills, tuition fees and salon visits will also get costlier by three per cent, as GST at the rate of 18 per cent will be applicable on all services from July 1 as compared to the current service tax rate of 15 percent.

4. In GST regime, buying a flat or shop will attract GST of 12 per cent as compared to current six per cent approximately.