Understanding GST’s Influence on Individual Financials

The Goods and Services Tax (GST) has a varied effect on personal financial situations. Many products have experienced tax reductions. This is primarily due to stringent anti-profiteering regulations implemented by the government, which aim to ensure businesses transfer these tax benefits to consumers.

Food Items

Many food items are exempt from GST, maintaining their previous non-taxable status. Consequently, their prices are anticipated to remain stable.

• Cereals
• Fresh fruits & vegetables (Other than frozen or processed)
• Meat (Other than in frozen state and put up in unit containers)
• Fish (not frozen or processed)
• Common salt

Initially, there was uncertainty regarding the taxation of packaged wheat, flour, and rice. However, the Revenue Secretary clarified that only products marketed under a registered brand name would incur a 5% GST. Unbranded packages from local stores will continue to be zero-rated. The effect on processed foods differs; for instance, corn flakes will become cheaper, whereas pastries and cakes will see price increases.

Household Items

Hair oil, soaps, and shampoos are projected to decrease in price. Conversely, laundry expenses will rise due to higher taxes on detergents and laundry services. Essential items like kumkum, alta, puja samagri, and bangles (excluding those made of precious metals) are GST-exempt, leading to price reductions. Nevertheless, makeup will become more costly, falling under the 28% GST bracket.

Other Household Items & Appliances

Kitchenware, such as stainless steel cookers and pans, will be slightly more affordable, with a 12% GST rate compared to the previous 19.5%. Sanitary fittings like taps and faucets will become more expensive due to their 28% GST rate. Large home appliances, including air conditioners and washing machines, will also see price increases. Maintenance and service agreements for these appliances will incur an 18% GST. Therefore, minor home and appliance repairs, such as replacing a tap, will become pricier under GST.

Medicines

Human blood and its derivatives remain exempt from GST, maintaining stable prices. While only chemical (hormone-based) contraceptives were previously exempt, condoms and other contraceptives are now also GST-exempt. Life-saving medications, including those for diabetics, are largely unaffected, as they were already taxed at approximately 5% under previous VAT/excise systems. However, Ayurvedic and other alternative medicines will become more expensive due to a 12% GST.

Mobile Network, DTH, and Other Services

Services now fall under an 18% GST, up from the previous 15%. This means mobile connections, DTH services, and ticket bookings made via agents or apps will incur higher costs. Conversely, computer prices are anticipated to decrease.

Restaurants

In most scenarios, dining out will be more affordable due to reduced taxes. The previous effective tax rate for restaurants was about 20.5%, which has been lowered to 18% GST for all establishments, including five-star venues. Non-air-conditioned restaurants not serving alcohol will see an even greater reduction, with a 12% tax. Many eateries have already begun offering discounts and happy hour specials, making dining out more budget-friendly under the GST regime.

Moviegoers

Movie tickets are subject to 28% GST, while cinema food and beverages incur 18% GST. The overall impact varies by state. Consumers in states with historically high entertainment taxes, such as Maharashtra and Uttar Pradesh, will benefit from reduced prices. Conversely, states like Punjab and Rajasthan, which previously had low entertainment taxes, may experience a negative impact due to GST.

Banking & Insurance

Ironically, financial transactions themselves will become more expensive due to the service tax rising from 15% to 18% under GST. This means premiums for life, health, and car insurance will increase. The cost of obtaining loans will also rise because of the service component in processing fees. Banking services, previously subject to a 15% service tax, will now incur 18% GST. Transaction charges for cash withdrawals from various bank ATMs and branches (after the initial five free transactions) will also see a similar increase from 15% to 18% GST.

Travelling

Medium to large car prices will rise due to a 28% GST rate plus cess. In contrast, small cars will become more affordable, attracting a lower 1-3% cess. Mid-sized cars, SUVs, and luxury vehicles will face a 15% cess, while motorcycles will have a 3% cess. Travel via app-based taxis, such as Ola and Uber, is now cheaper, with the tax rate reduced to 5%. Radio-taxi companies are also introducing discounts and offers, aligning with anti-profiteering initiatives.

Tourism

Railway ticket prices will see a minor increase. Economy airfares will decrease, but luxury and business class air travel will become more expensive. Budget hotel rooms priced under Rs. 1000 per day are GST-exempt. Rooms between Rs. 1000 and Rs. 2500 will incur 12% GST, while those between Rs. 2500 and Rs. 7500 will be taxed at 18%. Luxury rooms exceeding Rs. 7500 will be subject to a 28% GST. Generally, hotel rents will decrease, except for premium luxury accommodations.

Gold

Gold, diamonds, and precious stones will now be subject to 3% GST. This will result in higher prices in most states, where the previous cumulative tax rate was around 2% (comprising 1% excise and 1% VAT).

Housing

Cement prices are set to rise due to a 28% GST rate, consequently increasing costs for infrastructure and housing projects that rely heavily on cement. Office building rentals will incur an 18% GST. Conversely, residential building rents are exempt from GST. Below is an overview of how a monthly budget of Rs. 50,000 might be affected by GST:

Smokers

The tobacco industry’s impact is expected to be largely neutral, as the 5% cess implemented was lower than what the industry had anticipated.

Conclusion

The exemption list is anticipated to be limited to approximately 100 items. This limited scope aims to prevent disruptions in the tax chain and reduce opportunities for tax evasion. Most everyday consumer goods fall under the 12% and 18% GST slabs. Online shopping is expected to benefit from reduced logistics costs and more efficient inter-state transport due to the uniform tax system.

Former Finance Minister Arun Jaitley stated that the primary objective of rate setting was to ensure no commodity would see an increased tax rate under GST. Instead, many items would experience reductions due to the elimination of cascading taxes. Further clarifications from the GST Council are still needed regarding existing business tax benefits to facilitate a smooth transition to the GST regime.