GST: Is it Really Good and Simple?

Many things become cheaper & many dearer! That’s Your Good & Simple Tax!

It has been just over a week since the start of the revolutionary tax reform Goods and Services Tax (GST). There has been no `chaos’ so far as many had expected and many businesses which missed the deadline are migrating to GST. For most consumers it’s a mixed bag – if eating out has become more expensive, Fast Moving Consumer Goods (FMCG) have become more affordable.

In all, over 1,200 goods and 500 services have been divided in the GST bracket of 5, 12, 18 and 28 percent.

Flying on business class becomes dearer while for economy fliers GST offers a small saving. Houses will get cheaper as GST rate on under construction projects is 12% compared to 18% earlier. Aerated drinks become expensive, taxed at 28% under GST. Daily use items like toothpaste and soap are under 18% GST while shampoo and detergents, seen as luxuries, attract 28% GST.

Diamonds, gold and other precious metals have been put under a special tax bracket of 0.25 percent and three percent. The lower tax on these luxuries makes smuggling unattractive, justifying why glucose biscuits are taxed higher than gold biscuits!

Perhaps it will take about six months for things to settle down as companies move out old stock at discounts (good time to cash in on GST sales) and gear up for full scale GST roll out.

Here we look at multiple sectors and the impact that GST will have:

Online Shopping

It’s like an early Diwali for e-commerce shoppers. You can buy clothes to furniture at deep discounts. Furniture e-tailer Pepperfry.com is offering up to 55% off on products including beds, wardrobes, coffee tables, bean bags. This is part of the ongoing `Happy GST Sale’, which ends on July 10.

On Flipkart and Amazon.in you can go bargain hunting across brands like Levis, Adidas, Benetton and others and check out some cool sun glasses, watches, perfumes, deos, power banks and more.

Products like cameras are also going for deep discounts online. With GST cameras attract 18% tax. So, it’s not a bad idea to pick up a high end camera on discount while its still there. Will be a nice back up for your smartphone camera.

However for products like iPhones and other smartphones the difference between online and offline prices reduces, taking away some of the sheen of quick online purchases. Over time, with GST price gaps of online and offline products might narrow. Ofcourse the convenience of buying from anywhere rather than drive to a mall or a store to shop will keep online shopping attractive.

Telecom

Handset prices will go up and so will the mobile phone bills. If your mobile bill is Rs 1,000 you will have to pay Rs 30 extra as tax as GST rate is 18% on mobile services compared to 15% tax earlier. While mobile handsets also become more expensive.

Freelancers

Working from home is a good idea. And lot of people do that as freelances. But a freelancer in India has struggled to deal with tax issues as regulations were never very clear. Finally there’s some clarity and tax! Under GST, they get taxed as service providers.

Startups

For startups, getting an idea off the ground has been less taxing than dealing with tax regulation. Thankfully GST brings clarity as startups with pan India ambitions won’t have to deal with multiple taxes and state levies. GST streamlines the tax structure for a startup, makes it easy to do business, offers higher exemptions and helps save on logistics and associated expenses. Earlier, a startup with a turnover of Rs 5 lakh and above had to get VAT registration; this limit has been increased to Rs 10 lakh under GST.

Air travel

Flying business class will be dearer as GST rate increase tax from earlier 9% to 12%. Howver for economy class traveller there’s minor saving as GST on economy class is 5% compared to 6% tax earlier.

Equity Investments

A growing economy makes investments in stock markets attractive. The only dampener is increase in GST rate for such investments to 18% from 15% earlier. Though, if you are a long term investor (and believe in the India growth story!), this burden might appear insignificant.

Cars, bikes and auto parts

Hybrid cars are taxed at 28% GST and 15% cess. Even bikes above 350 cc will be dearer to buy. Though for most other scooters, bikes, SUVs, cars GST brings relief as these are more affordable. You can drive home with a saving of around Rs 2 lakh on Toyota Fortuner or Mercedes E Class.