The Goods and Services Tax (GST) will be a comprehensive tax on manufacture, sale and consumption of goods and services throughout India. It will replace the plethora of different taxes that the Central and State governments levy separately.
Even a tiny change in the tax chain leads to a domino effect; we can very well imagine the radical changes that would be brought in by the GST. The new tax law will bring far-reaching reforms, affecting every member of the society: from the common man on the street to an entrepreneur to a bureaucrat to an industrialist.
Effect of GST on common man: Products which may get costlier
The current rate of service tax is 15% and applicable to most services, excluding the essential services such as ambulance services, cultural activities, certain pilgrimages, and sports events. Under the GST, the rate will increase to 18% which will make services more expensive.
For goods such as edible oil, textiles, etc. while the excise duty is nil, the VAT, on the other hand, in several states is 5%. With the GST kicking in, the price of those goods may increase, burdening a common man’s budget. The GST may make consumer goods like tobacco products, cigarettes, aerated drinks costlier.
Consumer products that may get costlier due to GST rollout
- Mobile bills along with Internet packs
- Hotel and restaurant bills
- Transportation, including air travel, railways, and cab services
- Luxury cars
- Jewelry
- Cigarettes/other tobacco products
- Courier/DTH services
- Aerated drinks, for example, Coca Cola, Pepsi, etc.
Products that may get cheaper after GST implementation
Indirect tax on goods is currently high because several articles such as beauty products, consumer electronics, non-luxury automobiles, etc. are levied excise duty of 12.5% and VAT of 12.5–15%. Plus, there are many cascading taxes such as CST, octroi, entry tax, etc. making an article expensive throughout the value chain till the product reaches the customer.
Consequently, for consumer goods, the customer pays around 25–26% above production cost because of VAT and excise duty. With the GST rollout, in which the rate could be 18%, such goods should get less expensive.
Goods and services that may get cheaper after GST rollout
- Online Shopping (Amazon, Flipkart, etc.)
- Movie tickets
- Fast moving consumer goods (FMCG) goods like shampoo, processed foods, etc.
- Branded apparel
- Pharma products
- Paint, cement, and other construction material
- Fan, water heater, air cooler, TV, and other electronic goods
Also Read: Government To Launch ‘GST Offline App’ To Ease Pain Of Businessman
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Muqbil Ahmar is an avid blogger, a consummate writer, and a technology evangelist—but basically a storyteller at heart. Writing and music are his passions. He writes on startups and technology across various media platforms. He writes on topics ranging from movies to startups to technology to environmental conservation.
He is the editor and author of the Run Your Business Blog. With more than 10 years of experience in journalism, he has enjoyed stints with TV, magazines, and the Web. He believes that all human endeavor should be aimed at making our lives a better one. You can tweet him at @muqbil_ahmar or connect with him through LinkedIn and Facebook.
