Cited as the “single largest taxation reform” in independent India, GST is set to change taxation for every sector -from real estate to vehicles to consumer durables to branded goods to luxury items.
Among the items getting cheaper are chicken, oil, butter and bhujia (snack), while purchase of tea, coffee, masala powders, curd, cheese, biscuits, chewing gum, chocolate and ice cream will be dearer by 1-5%.
At the top of the chart with the highest taxation increase are items like paneer, sweets and cornflakes. Tobacco, alcohol and petroleum continue to be exempted, allowing the state government to dictate rates.
For a middle class family that earns between Rs 50,000-80,000 a month, the impact on the monthly budget will not be more than a few hundred rupees. For those earning in the Rs 1.75 lakh bracket, the purchase of luxury items and SUVs or sedans will not necessarily result in an increase of more than 2-4%.
While this is a rough estimate, individual likes and preferences might hold more weight as to which way the household budget might swing. “For instance, ghee and tea are taxed higher. Now, if your budget includes substantial quantities of ghee, then you are likely to feel the pinch. It is still early though, it has not been made law. And many items have seen exemptions,” says MR Venkatesh, a Chennai based chartered accountant.
One major area of change for consumers could be big-ticket purchases like homes, cars and consumer durables. With service tax increasing to 18% from 15% all services will become dearer. Loans will get more expensive.Purchase of health, life and motor insurance will also get more expensive.
“Service tax rates were increased earlier too, but we didn’t see any change in consumer buying patterns for over more than a decade. Impact on policies for the common man will be at a minimum. For instance, in the Pradhan Mantri Fasal Bima Yojana, a 3% increase in taxation will hardly result in a few paise increase,” says Tapan Singhel, CEO, Bajaj Allianz.
Source: Times of India