GST Impact: What Becomes Cheaper and What Becomes Costlier

By Registrationwala

9th June 2017


It was in the pipeline for 11 years and finally it looks all set that soon the GST will be rolled out for common people. In August 2016 with the Rajya Sabha passing the GST bill, India moved a step closer towards adopting a tax system that promised big. The ruling party and its supporter and even some economists see it as the biggest economic reform post Independent India. It is also expected to compliance rates, boost revenue generation and finally furnish a common national market by subsuming local and central taxes into one.  However, as the regime has finalized the date for its adoption – 1st July, there are enough fine details and also ambiguity over what will become cheaper or costlier.

Note: There won’t be any tax (0% tax) on almost 50 % of items in the Consumer Price Index basket, including food grains, milk, vegetables and essential medicines.

Although GST is a uniform form of taxing it does not remain constant across various entities. The GST council that was bestowed with the responsibility to define the limit for taxes came up with four slabs and accordingly goods and services will be put through these slabs as and when the taxing system is adopted across the country. On the whole, there are 1211 items whose rates have been fixed.

The first set of announcements that were recently made signal towards a positive future. Consumers can breathe a sigh of relief as most of the products are expected to get cheaper as the GST rates will be lower than the taxes which were levied earlier.

The four slabs that have been decided for goods and services are fixed at 5 percent, 12 percent, 14 percent and 28 percent. However, there are certain items that have been completely exempted from GST. And there are certain items for which the tax slab is yet to be finalized. These include gold, precious stone and tobacco.

GST is an economy friendly tax and hence it will for sure reduce the tax burden on the common populace. Here are those items that will be either costlier or cheaper under its effect.

Note: Daily items like milk, cereals, meat and curd will not have any impact on their pricing. These are kept outside the ambit of GST. On the other hand, services like religious travels, Haj travels, metro travel, education and healthcare too will remain untaxed under GST.

All Two-wheelers, large cars, white goods and SUVs will become cheaper. All branded goods will get cheaper as the GST rates for this market has been finalized at 18 percent. Currently the branded foods are taxed at 23-24.

There is enough good news for travellers as well. The hotels will be taxed at 18 percent as long as the daily tariff is below 1000 rupees. However, high-end hotels which charge more than 5000 rupees as daily tariff will have to pay 28 percent of tax. Currently hotels have to pay 22 percent as tax. Restaurants where the tax accounts up to 22 percent will also see a drop in final price of products as the GST has finalized 18 percent for all eateries and restaurants

Movie lovers rejoice. The price of movies in most states is expected to get lower as currently the entertainment tax goes up to 22-25 percent. However, with GST keeping the 18 percent tab, movie watching will become a cheaper experience. However, in some states where local movies are tax free, this step might not be welcome whole-heartedly.  All products of daily and personal care like soaps, hair oils, and toothpastes which are currently taxed around 24-28 percent will come down in price as they all will be taxed at 18 percent. Air travel will be charged at 5 percent for economy class while for business class it will be taxed at 12 percent. Even excise services and telecom bills are likely to get cheaper. All processed items will be taxed at 5 percent; currently these items attract a tax of 15 percent.

However the middle class will flinch at one of the aspects. It is expected that the small cars will become a touch costlier as they have been categorized in the highest slab – 28 percent.

Beverages like tea, coffee and some other spices are expected to become a little more expensive as they will be taxed at 5 percent. Earlier, these products were taxed at 3-4 percent. The current government does not seem to be very fond of gambling and casinos. The tax for these activities has been finalized at 28 percent.

For people looking to buy ACs or other home appliances, Diwali will now be even more important as all these appliances will now cost more. Wait for discounts to kick in then.

While soaps and toothpaste will be cheaper, other personal care products like shampoos and deodorants will be more expensive post GST. Thinking about constructing a house? You might have to shell a lot more as metals; mining and cement are expected to get costlier after GST implemented. The GST seem to on a mission to make the country a healthier one which is why it has decided to create a sinful category that will be taxed at 28 percent. All aerated drinks, tobacco and some of the other luxury goods will be categorized in sinful category. Apart from these, even services like school fees, courier charges, banking and insurance policies will get costlier too.

One thing that will get costlier and that one thing is something that in the past decade has become more than a necessity. Mobile phones will definitely expensive as the government as decided to impose a tax of 12 percent on the product. This means that the local manufacturer will not have the duty differential benefit. However, the phones that get imported in the country will keep getting cheaper. The local producers, though, will not be that happy with the new system of taxing.


GST Impact: What Becomes Cheaper and What Becomes Costlier