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, Insurance1815
Works contracts1215
Non AC/Non alcohol-serving restaurants1213-14
AC, alcohol-serving restaurants1822
Five-star restaurants2818
Airlines (Economy)56
Airlines (Business)129
Railways (AC)55.2
Movie Tickets2845 – 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 foil2818.5
Butter, ghee, cheese126
Dry fruits126
Jams, jellies1812
Branded paneer50
Branded cereals50
Coffee concentrates, custard powder2826
Protein concentrates, sugar syrups2826
Puffed rice, papad, bread00
Pasta, corn flakes, and cakes1819.5
Coffee, tea56
Condensed milk1818.5
Toilet paper1818.5
Meats & fish preparations1219.5
Vegetable fats & oils512
Ice cream, instant food mixes, sharbet1826
Refined sugar1826
Milk beverages1226
Ready to eat namkeen/bhujiya1226
Beet sugar, cane sugar526
Fresh milk00
Fresh vegetables, roots & tubers00
Fresh fruits00
Fruits & vegetable juices1212

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.

Shaving cream2826
Hair oil1826
Manicure, pedicure sets2826
Beauty or makeup preparations2826
Shampoos, hair cream, hair dyes2826

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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 bags286
Cell phones186
Air conditioners2826
Storage water heaters2826
Printer, photocopier, fax machines2826
Video game consoles2826
Exercise equipment2826
Sports goods1218.5
Spectacle lens1218.5
Proteins & fitness supplements1826
Steel utensils518.5

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
Wall paper2818.5
Paints and varnishes2826
Putty, wall fillings2826
Ceramic tiles2826
Tempered glass2826
Sand lime bricks, fly ash bricks56

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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.

1 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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