6 minsNovember 15, 2017
It has been nearly four months since the Government, on July 1, 2017, launched the Goods and Service Tax (GST) with much fanfare. Some may have already realised the impact of GST on their household budgets. Foodies and cinemagoers would have seen
the addition of GST to their bills.
The five GST slabs does away with several indirect taxes levied by the Centre, the new tax rates created certain changes in product pricing. Since the introduction of the new tax slab, the GST Council reviewed the pricing and made several revisions
in GST rates for specific goods and services.
Efforts were made to revise the tax slabs of certain products and add cess where required. For example, cess was added to cigarettes and higher segment of cars, as the effective tax rates turned out to be lower than the pre-GST rates. Further,
giving in to public demand, the Council in its 23rd meeting held on November 10, 2017, cut rates on over 200 items in all.
What were these changes?
- List of items reduced to 18% from 28%*
- Furniture, fans, lamp and light fitting, sanitary ware, non electric domestic appliances, glass of all kinds and articles thereof
- Suitcase, travelling bags, hand bags, wrist watches, clocks, all musical instruments
- Detergents, washing and cleaning preparations, room deodorisers
- Liquid wash or cream for skin, shampoos, hair cream, hair dyes, pre-shave, shaving or after-shave preparations, personal deodorants, bath preparations, perfumery, cosmetic or toilet preparations, beauty or make-up preparations, razor and razor
- Chocolates, chewing gum / bubble gum, malt extract and food preparations of flour, groats, meal, starch or malt extract, waffles and wafers coated with chocolate or containing chocolate, cocoa butter, fat, oil powder, extract, essence ad concentrates
of coffee, miscellaneous food preparations
- List of items reduced to 12% from 18%*
- Furniture wholly made of bamboo or cane, medicinal grade oxygen, printing ink
- Hand bags and shopping bags, bags of jute and cotton, hats (knitted or crocheted), spectacle frames
- Condensed milk, refined sugar and sugar cubes pasta curry paste, mayonnaise and salad dressings, mixed condiments and mixed seasoning diabetic food
- List of items reduced to 5% from 18%*
- Puffed rice chikki, peanut chikki, sesame chikki, revdi, til revdi, khaza, kazuali, groundnut sweets gatta, kuliya, flour of potato put up in unit container bearing a brand name, chutney powder
- List of items reduced to 5% from 12%*
- Narrow woven fabric, finished leather, chamois and composition leather, coir cordage and ropes, jute twine, coir products
- Desiccated coconut, idli, dosa batter.
- List of items reduced to Nil from 5%*
- Guar meal, hop cone, certain dried vegetables, such as sweet potatoes, fish frozen or dried, unworked coconut shell, khandsari sugar
*For a comprehensive list, visit http://www.cbec.gov.in/htdocs-cbec/gst/
Only 50 items remain in 28% tax bracket. Rates on 178 items in the 28% slab were reduced to 18%. In addition, rates on 35 other items were reduced to lower slabs.
Further, the GST Council reduced the tax rate on all restaurants to 5% without Input Tax Credit. Five-star hotels will continue to attract the 28% GST rate. Consumer goods such as air-conditioners, refrigerators and washing machines will remain
in the highest tax brackets.
The new rates come in to effect from November 15, 2017.
In September and October 2017, GST rates were revised for as many as 25 items that fell in the highest slab of 28%. Post-revision, items such as ‘Idols made of clay’ were exempt from GST, while “hard rubber waste’ and ‘e-Waste’
were reduced to the 5% tax bracket. As many as 8 product categories were shifted from the highest tax slab to the 12% tax bracket.
Overall, the tax rates of many household items and other consumer goods stand reduced. This will certainly come as a sigh of relief for certain segment of consumers. Even producers of these products will cheer the revision in the GST tax slabs
for these product categories.
But whether or not it will have a major impact on your daily household budget will depend if the lower rates are passed on to consumers. In good faith, some consumer companies have proactively stated that they will pass on the lower rates to consumers.
How the GST regime will affect you depends entirely on your spending habits. Some may be benefitting from lower rates and GST is lower or exempt for basic goods and most items of daily needs. However, if you seek added convenience or branded products,
you will have to shell out a higher price. Mobile bill payments, credit card bill payments, and other utility payments that form a significant part of a household budget, will continue under the existing slabs.
While you adjust your expenses to the new tax, keep a track of your total expenses to check how your budget stands under GST. If your expenses have shot up due to higher taxes,
take corrective measures immediately. Effectively managing your household budget will not only help steer your finances back on track, but may also save money for emergencies and meet the financial objectives of the family.
You need to plan and prioritise your finances. By managing your spends wisely, and saving small amounts systematically you will be able to live a comfortable life. But remember, along with smart spending, you also need to invest wisely to grow your money.
Remember the famous quote attributed to Ben Franklin – “A penny saved is a penny earned.” Well, if you invest the money saved wisely, it will be worth more than the penny earned. Hence, saving and investing is both equally important.
You investments need to be suitably aligned to accomplish your financial goal.
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Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.