GST Bill passed yesterday is a historic piece of legislation which promises to unify the tax system for the nation and increase the GDP by 2 per cent.
With the Rajya Sabha passing the long-awaited Goods and Services Tax (GST) Bill, country’s most transformative tax reform in decades is likely to affect the common man in numerous ways.
What GST means to you?
After being unanimously passed, the historic legislation promises to unify the tax system for the nation and increase the GDP by 2 per cent. So while services could get more expensive, it’s a mixed bag for consumers for goods.
But how does it impact you? Here is quick roundup on how this tax legislation will impact your budget.
Eating Out to get Expensive
For eating out, if you spend Rs 1000. Currently you pay on an average 18.5 per cent as service tax and VAT.
So apart from the service charge, you usually have to bear the burden of Rs 1185.
Under the GST regime, its expected that the rates can be fixed at 18 per cent or above.
Accordingly at 20 per cent approximate tax rate, your bill is set to go up, to at least 1200 rupees.
“Services will get more expensive if GST is implemented as states will now have the services under their net and hence it will mean they can fix higher rates,” said an economist at India ratings-Fitch ratings.
Phone Bills to get Expensive
As the states are expected also to decide service tax rates, your phone bill could see escalation of taxes.
So on a bill of Rs 1000 on which you pay service tax of 15 percent and finally pay Rs 1150.
Post the GST implementation, if the tax rate is fixed at 18 per cent then you will have to shell at least Rs 1180.
Thomas Mathews, Cellular Operators Association of India told India Today, “Under the GST, the tax rate is bound to go up and the telecom operators will have to pass it on to the consumers, we can look at internet packs and call rates getting higher.”
Ready-Made Garments to get Cheaper
Buying clothes and fashion brands will be cheaper, as the effective excise duty (7.5 percent) and VAT of average 5 percent will be subsumed in GST slab.
So if you pick up a Rs 1000 T-shirt today, you pay 1125 including various taxes. But if GST is kept at 12 percent, then your final bill will be Rs 1120.
Buying Car will be Cheaper
Buying a car will not only be easier in different states with price similarity between manufacturing and non-manufacturing states but tax experts believe it will be cheaper as well.
For example, a Rs 5 lakh car attracts excise duty of 12.5 per cent, and along with VAT roughly comes to Rs 6.25 lakh. Now under the GST it is expected to go down as much as Rs 35,000 if the rate is fixed at 18per cent, so for you the price will be Rs 5.9 lakh rupees.
“We will see more tax competitive rates and will reduce prices for consumers. We are looking forward to the GST”, Roland Folger, CEO, Mercedes-Benz India told India Today.
Buying phones to get Expensive
If you planning to buy an imported phone from the market the countervailing duty and VAT comes to 12.8 per cent.
So if the GST council decides to peg the rate at 18 percent, then for a Rs 10,000 phone for which you pay Rs 11,280 currently, you will have to shell out Rs 11,800.
LED TVs to get Cheaper
But watching TV could get cheaper, as part of the Make in India initiative, the GST is expected to be lower.
So at present for Rs 20,000 LED TV you pay around 24.5 per cent tax shelling out Rs 24,900 eventually.
As the GST rate is expected to be at 18 per cent, for you the cost will come down to Rs 23,600
Jewelry to get Expensive
Tax experts have pointed how currently only 2 per cent of effective taxes is passed on to the consumers but as per the GST model, at least 6 per cent rates could be imposed, impacting the jewelry purchase.
Buying bags, shoes, electronics online will be getting more expensive as the e-commerce industry comes into a tax net and will have to pay tax deducted at source for every purchase from its sellers.
So e-commerce companies which will see shrinking of profit margins & increase tax compliance net could slash discounts & freebies that they offer.
“E-commerce will see revision of its tax compliance and its time we understand the industry in India. But consumers can benefit from lower logistical cost and faster delivery. Overall tax collection will be a challenge, Harishankar Subramaniam, National Leader, Indirect Tax, EY.
Source: India Today