How GST would Impact your Household Budget?

How GST would Impact your Household Budget?

How GST would Impact your Household Budget?

India is moving towards implementation of GST (Goods and Service Tax). GST is considered one of the biggest indirect tax reforms wherein all the taxes like excise tax, service tax, VAT, etc. would be replaced with one tax. This in turn would help in ease of doing business. GST is effective from July 1, 2017 and so the GST rates on most goods and services have been finalized by GST Council last week. Though the government says that GST would bring prices down, we give a broad overview on how it would impact your household budget.

GST Tax Structure:

GST has 4 tax slabs – 5%, 12%, 18% and 28%. Also there is provision to impose cess above and over this tax.

Download: Ultimate Tax Saving Guide for FY 2017-18

GST on Services:

Education, Healthcare and transport of goods which were exempted from service tax continue to be exempted in GST. But most services like telecom, business class air travel, financial services such as banking and insurance, telecom, information technology would go up from 15% to 18%. Eating out in AC/Non-AC restaurants and watching movies in theaters may become slightly cheaper but five star hotels would become more expensive. Below are the new GST rates Vs exiting tax.

SERVICES        GST        Existing Tax
Telecom, Insurance 18 15
Works contracts 12 15
Non AC/Non alcohol-serving restaurants 12 13-14
AC, alcohol-serving restaurants 18 22
Five-star restaurants 28 18
Airlines (Economy) 5 6
Airlines (Business) 12 9
Railways (AC) 5 5.2
Movie Tickets 28 45 – 100

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GST on common Household Goods

Cereals, Salt, puffed rice, milk, fresh fruits & vegetables etc. would continue to be exempted from taxes. However branded cereals and paneer would attract 5% GST (which had NO existing taxes). Butter, ghee, cheese, Dry fruits etc. would attract 12% tax from exiting 6% making them costlier. Vegetable oil, ice creams, sugar etc. would become cheaper due to reduction in taxes. Below is the comparison of new GST rates to existing taxes.

CONSUMER GOODS       GST      Existing Tax
Aluminium foil 28 18.5
Agarbatti 12 0
Butter, ghee, cheese 12 6
Dry fruits 12 6
Jams, jellies 18 12
Branded paneer 5 0
Branded cereals 5 0
Coffee concentrates, custard powder 28 26
Protein concentrates, sugar syrups 28 26
Cereals 0 0
Puffed rice, papad, bread 0 0
Salt 0 0
Pasta, corn flakes, and cakes 18 19.5
Coffee, tea 5 6
Condensed milk 18 18.5
Toilet paper 18 18.5
Meats & fish preparations 12 19.5
Vegetable fats & oils 5 12
Ice cream, instant food mixes, sharbet 18 26
Refined sugar 18 26
Broomsticks 5 18
Milk beverages 12 26
Ready to eat namkeen/bhujiya 12 26
Beet sugar, cane sugar 5 26
Fresh milk 0 0
Fresh vegetables, roots & tubers 0 0
Fresh fruits 0 0
Fruits & vegetable juices 12 12

Also Read: How are Mutual Funds Taxed?

GST on Beauty & Personal Care:

There is marginal increase in taxes from 26% to 28% for most Beauty & Personal Care products.

BEAUTY AND PERSONAL CARE       GST       Existing Tax
Razors 28 26
Toothpaste 28 26
Deodorants 28 26
Aftershave 28 26
Shaving cream 28 26
Soap 18 26
Hair oil 18 26
Manicure, pedicure sets 28 26
Perfumes 28 26
Beauty or makeup preparations 28 26
Shampoos, hair cream, hair dyes 28 26

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GST on Home Appliances:

The GST rates on home appliances such as Air conditioners, Refrigerators, etc. would be marginally higher from 26% to 28%.

Leather bags 28 6
Cell phones 18 6
Air conditioners 28 26
Refrigerators 28 26
Storage water heaters 28 26
Printer, photocopier, fax machines 28 26
Wristwatches 28 26
Furniture 28 26
Video game consoles 28 26
Exercise equipment 28 26
Sports goods 12 18.5
Spectacle lens 12 18.5
Proteins & fitness supplements 18 26
Steel utensils 5 18.5

Also Read: 13 Investments to Generate Regular Income

GST on Construction Material:

Looking to construct your house? The GST rates would have negligible impact as there is slight increase of taxes in some cases while there is reduction in other. So there should be no significant impact on net taxes.

CONSTRUCTION       GST       Existing Tax
Cement 28 30
Wall paper 28 18.5
Paints and varnishes 28 26
Putty, wall fillings 28 26
Plaster 28 26
Ceramic tiles 28 26
Tempered glass 28 26
Sand lime bricks, fly ash bricks 5 6

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GST on Cars/Two Wheelers:

With GST, most cars would be taxed at lower rates. However the biggest beneficiaries would be expensive cars where the tax would reduce from 55% to 43%. In case of small cars the tax would come down from 30.2% to 29%.

GST impact on cars and two wheeler

GST impact on cars and two wheeler

To Conclude:

The GST rates have been fixed so that there is minimum impact on inflation. Its implementation well this might turn out to be a BIG tax reform.

One thought on “How GST would Impact your Household Budget?

  1. Great article, extremely insightful. I was curious about the impact of GST on higher educational institutes? Would there be a GST-free education?

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