What will be the impact of GST?
Many say that implementation of single goods and services tax (GST) will make India one country. It will enhance the overall efficiency by easing movement of goods from one state to another. Overall, it may add a couple of percentage points to the gross domestic product (GDP).
The GST will be implemented by 1 July 2017. Though the bill is on the verge of being implemented, there is confusion about the impact.
What is GST?
Different taxes are charged during manufacture and consumption of various goods and services. Taxes levied during manufacture of goods and services are, usually, charged by the Central Government. However, taxes levied at the time of consumption are charged by the State Governments. The different indirect taxes levied on goods and services include Value Added Tax (VAT), Swachh Bharat Cess, Krishi Kalyan Cess, service tax, central excise tax and so on.
The GST aims to unify all these separate indirect taxes into one. All the different taxes would be subsumed by GST. Thus, the price of goods and services are expected to be revised post GST implementation.
Also Read : The GST Bill in India - All You Need to Know
How does GST impact your Finances?
GST is expected to have varying price changes on various products. The resultant price change may or may not be favorable for the product. Let us try to stipulate the expected resultant price changes.
Sectors where GST could Reduce the Cost
- Automobile – The component costs would reduce as the pricing would be competitive post GST. This would lower the cost of manufacturing the vehicle. Moreover, the retail price in different states would be uniform.
- Online transactions – Inter-state trading would become easier through GST. Thus, the cost of logistics, sourcing the goods and services and their delivery would become easier. This would improve the online marketplace making it more attractive to customers. With an increase in online sales, the prices are expected to get cheaper.
- Goods and services in general – With GST subsuming the different taxes, the price of goods and services are expected to become cheaper.
Also Read : GST - A Complete Guide
Instances where GST would Prove Expensive
- Telecommunication sector – The telecom sector charges only a service tax of 14%. However, with GST, the tax rate is expected to increase to 18% making phone bills more expensive.
- Jewelry – Currently you pay only 2% tax on any jewelry. However, post GST, this tax rate is expected to increase to 6%, making jewelry dearer. So, if you are planning to gift jewelry to yourself or your loved one, buy it before GST is implemented.
- Banking sector – Banks charge a service tax of 14% on their transactions. GST is expected to increase this tax rate to 18%-20%. This would make banking transactions more expensive.
- Cess on other goods – The Government also listed the amount of maximum cess on other goods with respect to GST. Paan Masala is expected to have a cess of 135%. Aerated drinks, mineral and flavored water could have a cess of 15%. Cigarettes would have a maximum cess of either Rs.4170 per 1000 units or 290% or both. Coal could have a cess of Rs.400 per tonne. Luxury cars and other supplies would have a maximum cess of 15% each.
The implementation of GST could, thus, reveal a mixed bag of results. Some results could be good, while others could be not so good. However, one cannot ignore the effect of GST on the economic growth of the country. With multiple taxes being removed, GST would give a boost to the GDP of the country. Thus, the impact of GST on Indian economy is expected to be favorable.
The GST will also affect long-term investments like equity and mutual funds. However, lower risk investments, like fixed deposits and PPF, might not be impacted. If you are looking for an option for fixed deposit, you can consider the Bajaj Finance Fixed Deposit for easy online access.