GST got implemented. What is means and what will become cheaper or expensive for you now?

With GST getting implemented effective from 1st July 2017, tax slabs for various goods and services have got changed and various taxes being levied on different products, services and goods will come under one tax for whole country. A single GST will replace several existing taxes and levies which include: central excise duty, services tax, additional customs duty, surcharges, state-level value added tax and Octroi. Other levies which are currently applicable on inter-state transportation of goods are also likely to be done away with in GST regime.

While in the long-term, GST should have quite a favourable impact on most sectors in the Indian economy, the short-term impact, as in the case of most reforms, may be limited. Basis the GST implementation experience in most countries, India may witness an inflationary impact during the transition phase, which should fade away with the legislation sinking in and operationalization of measures like anti-profiteering.

Here is a look, at the expected immediate impact of GST on the common man’s pocket.

These services are likely to become more expensive

A commoner should, at least till the time the service industries do not pass on the benefit of increased credits, budget for some increased pocket pricking on some necessary services like:

• Mobile bills.
• Renewal premium for life insurance policies.
• Banking and investment management services.
• Basic luxuries for a common man like WIFI and DTH services, online booking of tickets may become costlier as well.

Prices of these essential services also likely to rise

Also, in the backdrop of quite a bit of current exemptions subsiding, various essential services may cost an arm and a leg under the GST regime. For example, where the current exemptions are discontinued:

• Residential rent
• Health care
• School fees
• Courier services
• Commuting by metro or rail may become expensive.

Services that may get cheaper in most states.

With entertainment taxes getting subsumed in GST, prices of movie tickets and theatrical performances may become cheaper in most states.

• Dining in restaurants may also become more pocket friendly in most states.
• Essential goods, certain vehicle categories likely to be cheaper

In terms of goods, where an exemption/ lower rate is prescribed for essential goods, GST is expected to marginally better the house economics as a whole. Further, under the GST regime, depending on the current supply chain arrangement and state of operation following may become cheaper:

• Two-wheelers
• Entry-level sedan (except small cars)
• SUVs and luxury or premium cars
• Marginal impact on white goods

Again depending on the current supply chain structure and related indirect taxes, a commoner could expect a 2% to 3% plus or minus impact on white goods like:

• Televisions
• Washing machines
• Stoves

Aerated drinks, sin goods prices likely to jump – The Government aligned with its negative outlook to deleterious goods, proposes a higher tax on ‘sin goods’ which essentially includes aerated drinks, cigarettes and tobacco products. Where a higher rate of around 40% is proposed on aerated drinks, the same may witness an increase in their prices.

Positive impact on cost of most supplies in long term expected – While the above anticipations are mostly basis the information released/ statements of government officials available in the public domain, we would need to await the final fitment structure released by the Government on categorization and related rates for various goods or services. Nonetheless, with enabling of anti-profiteering and other corrective measures, GST should result in a decreased cost for most supplies to the end consumer in the long run.