GST or Goods and Services Tax is going to be implemented in pan India soon. This is an indirect tax reform targeted to simplify the taxation system on goods and services in all forms. It will make India a single market with specific tax slabs for different kinds of goods and services. GST bill is a long pending issue in the parliament of India. The bill is already passed in Lok Sabha. It is expected that it will get the final nod from Rajya Sabha soon. Once rolled on, it is speculated that it will make some goods & services cheaper and some products and services costlier. After announcement of GST rates for some of the commodities, impact on their prices as also shown below.
Advantages of GST Bill
GST will be levied in four different slabs 5%, 12%, 18%, and 28%. GST council, the apex body in this matter, will decide how the products and services will be taxed under these slabs. However, as per the decision of GST council, some essential goods that are used in every household and economically weaker sections in India like pulses, rice, grains, salt, bread, and dairy products will get cheaper after the implementation of GST as no tax will be levied on them.
Some other commodities that will also become cheaper are processed foods, personal care products, edible oil,electrical goods, kerosene, coal, processed meat, packaged juice, refined sugar, computer parts, snacks, ayurvedic medicines, books, incense sticks, etc.
Some services like non air-conditioned restaurant, air-conditioned restaurants where wine is not served, low budget hotels and lodges, airlines, online cab, and entertainment services will also become cheaper in India.
Disadvantage of GST bill
As the taxation slabs will be straightforward some products and services will become costly. GST council is yet to decide taxation on all products; however, as per their decision till today, it is expected that products like tea, coffee, soft drinks, spices, chocolate, molasses, tobacco products, ceramic tiles, sunscreen lotions and creams, consumer durables, two-wheelers, and small cars, cement, etc. will be costlier.
Services that will be more expensive than it is now include banking and insurance services, internet and related services, mobile telephone, courier, education, residential rent, traveling in air-conditioned railway, metro rail, gambling, 5-star hotels, etc. It is also expected that prices of some categories of medicines and heath care services may rise after the implementation of GST.
Impact of GST on some attractive commodities
It is obvious that imposition of GST will either decrease or increase the prices of some products, whereas the prices of many products will not be affected. Here is a quick comparison on some attractive commodities:
- Food Grains – Implementation of GST will not change their price as no GST will be imposed.
- Butter and cheese–At present 12.5% tax is imposed on them. Their prices will not change much as these products will fall under 12% GST slab.
- Edible oil and honey – The current tax remains around 6%. A 5% GST will be levied on these products. Hence, their prices will go down.
- Two-wheelers, small cars, and commercial vehicles – Current effective tax rate is 23.7% whereas consumers will have to pay 28% GST. This means two-wheelers will be costlier under GST.
- Cement – Currently 23-26% tax is levied. This product will come under 28% GST slab. Hence, cement will be costlier when GST will be implemented.
- FMCG products – Consumers pay 16-24% tax on any FMCG which will be become 28% when GST will be effective.
- Fruit juice – Now 6-8% tax is imposed which will become 12% under GST. Obviously, fruit juices will be costlier in future.
- Lifesaving drugs – Presently no tax is levied on these medicines but they will fall under 5% GST slab.
However, these GST slabs are just indicative as they may be changed in future
GST will be effective from 1st July 2017. In the current scenario, the imposition of sales tax takes place on multiple levels. Here, a business house has no scope to take tax credits. Hence, double taxation during a transaction process goes on increasing the price of the products or services. Through GST this scenario is going to change abruptly. The tax will be levied through a simple mechanism that will be comprehensive and candid in every sense.