GST Tax and GST Impact in India Explained

Goods and Services Tax (GST) is one of the biggest tax reforms in India. Prior to the implementation of GST, states and central governments levied multiple indirect taxes. However, the system had several drawbacks, and in an effort to do away with these, the government chose to implement GST. Its primary objective is to bring uniformity with a single tax. In this article we tried to explain the GST impact on the economy and also simplified various GST slabs basis product categories.

In an earlier article we had explained various GST slabs basis its structure.

The different GST tax slabs are 0%, 5%, 12%, 18%, and 28% for various goods and services. Almost 50% of goods and services fall within the 18% tax rate. Below are a few commodities and services that are commonly used and how the new tax affects these.

1. Footwear and apparels
The GST impact on footwear and apparels is clearly visible if you compare the old and new tax structures. If you purchase footwear that cost more than Rs 500, you will pay an 18% GST. However, if the cost is less than Rs 500, the applicable GST is 5%. All types of ready-made apparel will now be taxed at 18%, which reduced from 28% when GST was first implemented

2. Online cab services
Online taxi booking services, such as Ola and Uber will now be taxed at 5% under the new tax regime. This will make taxi rides cheaper because the previous tax rate was 6%, thus encouraging people to use these services.

3. Train services
As the effective rate on air-conditioned travel has increased by 0.5% from 4.5% to 5%, upper-class passengers will have to pay more.However, business travelers will be allowed to take advantage of input tax credit (ITC), which reduces their expenses. Sleeper class and local train travelers will not be affected.

4. Insurance premiums
The GST reforms have increased the applicable tax from 15% to 18% on all types of insurance policies. Therefore, policyholders will have to shell out more to avail of insurance coverage.

5. Entertainment
Movie tickets below Rs 100 will be chargeable at 18% GST. However, tickets exceeding Rs 100 will be taxed at 28%. The impact of the new tax varies from one state to another. Consumers from states with higher entertainment tax would enjoy reduced prices. On the other hand, users in states like Himachal Pradesh with 0% entertainment tax will have to pay more. Business owners will also be impacted based on the states. Furthermore, the availability of ITC allows owners to offset against GST on sold tickets.

Most necessities are tax-free under the new regime. Below is the list of certain products that are exempt from the GST in India:
• Rice,wheat, and unprocessed cereals
• Unbranded Atta, Besan, or Maida
• Fresh vegetables and unprocessed milk
• Sindoor/Bindis, bangles, etc.
• Kid’s coloring book/drawing books.

These are just a few ways in which the GST is expected to impact the people of India. In essence, a concrete effort has been made to maintain all base necessity items in the low tax slabs and charging all luxury items on higher tax rates. In the next article we will explain the GST impact on India making a comparison between the old and the new tax structures.

Leave a Reply

%d bloggers like this: