The Lok Sabha has finally Passed the Goods and Services Tax Bill and it is expected to have a significant impact on every industry and every consumer. Apart from filling the loopholes of the current system, it is also aimed at boosting the Indian economy. This will be done by simplifying and unifying the indirect taxes for all states throughout India.
Let us have a look a few things that will be influenced by the GST.
What will be expensive:
Dining out will be expensive. Here’s an example explaining how -
In a restaurant, say a consumer spends Rs.100. Currently you pay an average of 18.5% as service tax and VAT. So apart from the service charge, you usually shell out Rs 118.5.
Now, according to GST, it’s expected that the rates can be fixed at 18 to 20%.
Accordingly at 20% approximate tax rate, your bill will be 120 rupees.
Suppose on a bill of Rs 100 on which consumer pays service tax of 15 % and finally pays Rs 115 as total amount to his service provider.
After GST, if the tax rate is fixed at 18 % then he will have to bear the brunt of Rs 118.
After implementation of GST, internet packs and call rates are likely to get higher.
The yellow metal too is all set to become expensive. At this point of time, only 2% tax is paid by the buyers, but sadly though, according to GST at least 6 % is expected to be paid by buyers. This will impact jewellery sales.
Don't be surprised if E-commerce companies abruptly stop giving discounts & freebies that they offer.
For every purchase from its sellers, the e commerce companies will pay a fixed TDS.
Consequently, the cost for example commerce will increase. This will affect sales as customers will be expected to shell out more money for the same goods.
Banking & Insurance
Services offered by banks are taxed at 14.5% currently which under GST regime are likely to become costlier at standard rate of 17-18%.
Several services by bank to a customer are centralized or localized. These complexities add to compliance costs, making it expensive for consumers.
Air tickets to will become expensive post the implementation of the GST.
Service tax on airline fares ranges between 6%-9%. GST will pump the taxes up further to 15%-17%
What will be cheaper:
Buying a car
The luxury of a car will now seem reachable for the common man.
Buying a car will be hassle free in different states with same prices everywhere.
So a Rs.5 lakh car with excise duty of 12.5 % and with VAT roughly totals to Rs 6.25 lakh. Now under the GST, it is expected to get lower up till Rs 35,000. If the rate is fixed at 18%, the price will now be Rs 5.9 lakhs. Automobile industry looks upwards.
Currently a buyer shells out Rs 20,000 for a basic LED TV plus 24.5 % tax making the total cost rise to Rs 24,900.
As GST will be around 18 to 20 %, the buyer will now approximately pay Rs 23,600.
Entertainment Taxes are likely to reduce by 2-4%.
Multiplex chains will increase revenues as current high rate of entertainment tax will be uniform in all parts of the country. Lower the ticket price, higher the ticket sales. Even film producers will benefit from this advancement.
Companies manufacturing processed food pay various taxes summing up to 24%-25%. With GST, it’ll sum up to 17%-19%. Such great savings from the taxes may issue a decrease in prices of products, making it cheaper for end consumers.
Tax for cement is 25%. With GST it will become 18%-20%. With logistics cost also decreasing, cement depots will also decrease. Overall cost will also decrease.
If implemented well, GST can help boost India’s economy and help make the process of levying indirect taxes more streamlined.
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