How will GST impact your Household Budget?

The unified indirect taxation system of GST has been operational for almost two years since its implementation in 2017. The impact of the new tax regime on the business economy and government organisations is multi-faceted and can only be experienced in differing periods by different sectors.But while a lot has been said about the positives and negatives of GST and its impact on businesses and Indian economy, what matters to a common man is the GST impact on household expenses. Let us have a look at how this unified tax regime has impacted households in the last two years-

The biggest portion of a standard monthly budget is generally spent on daily use products. This includes food items, household products, personal care products, and miscellaneous items such as wristwatch, accessories, leather bag, automobile, and more.While GST has reduced the cost of many of these products, the cost has increased in some cases. For instance, if the base price of refined cooking oil was Rs. 200, the tax on the same was Rs.22-23 before, but it has now fallen to Rs. 10. On the other hand, things like appliances have become more expensive.

While GST has mostly reduced the cost of many of the daily use products, the same cannot be said for services generally used by households. Most of the services such as financial services and telecom services have become slightly more expensive.Even transport services have become expensive depending on the travel class you generally prefer. For instance, travelling in business class has become more expensive while economy tickets have got cheaper.

To further reduce the impact of GST on common man, the government has also exempted many goods and services. GST exemptions are available on unprocessed milk, meat, fish, vegetables, unprocessed cereals, education, sleeper class and local train travel, and more.Healthcare too is exempt from GST; however, medicines continue to be taxed under 5%, 12%, and 18% GST tax brackets.

Overall, it can be said that GST has been able to reduce household expenses. Several daily use products are now under a lower tax rate, and several of them are also exempt from GST.
But if you prefer branded products or more convenience, you’d mostly be required to pay a higher price. If you see that your monthly budget has increased after GST has come into effect, you can take corrective measures as cheaper alternatives are available in most cases.

• Most essential products, especially household products and services, come under GST (Goods and Services Tax). They are either exempt from tax or are charged very less. This may be 5% GST or even less in some cases.
• The introduction of GST has helped many small traders. They are almost at par with traders. One tax in the form of GST has helped many small businessmen to file their returns every quarter through online mode.
• The tax structure has become simple and easy to understand. A few exemptions are also given to many products and services. Earlier, a lot of taxes were imposed, which made the maintenance of accounts and filing tax returns very complicated. Now, most of the taxes have come under GST, which makes it easier for the common man to understand.
• The dues will be received by the poor.
• Any product or service will be allowed to move freely anywhere in India.
• Items such as washing machines, 2-wheelers, movie tickets, stoves etc., can be purchased at a lower price than the price before implementing GST.
• GST has reduced corruption in sales. Unnecessary taxes were imposed on the common man of which they were not even aware. By introducing GST, this is completely eliminated.
• Expensive smartphones and SUVs, and luxury cars are comparatively within reach of the common man. This has been possible with the implementation of GST, which has brought down taxes. 7.5 % of taxes are reduced on these items.
• 20% reduction on logistics for non-bulky goods with the introduction of GST. This could happen because cross-border taxes and discrepancies in the check post are eliminated.

• Unregistered suppliers and composition levy taxpayers will now be able to provide goods anywhere in India via ECOs (E-Commerce Operators). This is subject to a few restrictions.
• Decriminalisation of GST offence - this includes obstructing officers from carrying out their duties, failing to provide relevant information and tampering with evidence. The tax amount, which was earlier 50% to 150%, has been reduced to 25% to 100%. With the exception of the crime of not issuing bills with GST.
• GST filing returns and statements will now be limited to 3 years from the due date.
• A provision is added to CGST Act where ITC ( Input Tax Credit ) shall not be receivable if it is obtained by a taxable person with respect to services and goods or both. this is not receivable only if the taxable person is using it for activities related to corporate social service.
• A new section of the CGST Act is added that allows a registered person to share data with other systems in a prescribed manner. This can be information uploaded for the creation of an electronic invoice such as an E-way bill, registration of the application, statement of outward supply etc.
• Changes in Schedule III of the 2017 CGST Act - supply of goods or services should not be viewed as a result of transactions or activities. February 1st 2019, changes were made in this schedule to keep certain activities and transactions outside the scope of GST, like sales over high seas, supply of goods from one territory to another and supply of warehoused goods prior to home clearance. The provisions are being included.
• The definition of online information and database access or retrieval services in the IGST Act is being revised to remove and make it automated.
• The provision to sub section (8) of section 12 of the IGST Act is eliminated where service providers and receipts are different.
• GST amendments in Section 2 Clause (16) of IGST Act 2017 - definition of ‘non-taxable online receipt’ has been revised. This will ensure that OIDAR service providers located in a non-taxable territory providing services to a registered person residing in a taxable territory are subject to taxation.

1. What effect does an increase in taxation have on household? Taxation on households could negatively impact the budget of every household. Prices of electricity, fuel, and cooking gas have risen. This is due to rising prices worldwide and the government not reducing the subsidy on these products. Not only this, but there are also many other household goods for which the subsidies provided by the Government are not sufficient. Any increase in subsidies may reduce the net cost of the products. This would, in turn, lead to more savings in any family.
2. What are the benefits of GST to the people of India? The benefits of GST to the people of India are as follows-
3. When government hikes GST for household items? The government hiking GST for household items will result in a rise in the inflation rate. The price of food articles will go up and will affect the common man. The GST items such as textiles, footwear, and clothing are hiked from 5% to 12%. GST of 18% on kitchenware, tableware, hygienic and toilet articles, plastic and other household articles. A Government hike in GST is an additional burden on every household. The common man has started to feel the pain as additional taxes are merely making it very difficult to save some amount. Expenses are at an all-time high.
4. What are the new changes in GST 2023? The important budget proposals related to GST 2023 were - -
5. What impact that tax increases will have on households and businesses? The increase or decrease of taxes is in the hands of the Government. Any increase in taxes will affect the savings of an individual. If household items are increased, then it would mean spending more to purchase items with less money left at disposal. If the taxes are decreased, then less amount will be spent to purchase household items. This would mean more savings for the family, which could be utilised somewhere else.A tax increase on households will impact businesses. The disposable income after deducting tax income will decrease. An extra amount will be spent to buy household items. This, in turn, will affect the profits of any business.The supplier or the seller of the goods should charge and collect the GST (at the rate applicable) from the customer or buyer. After collection, this amount has to be deposited with the Government after availing of an input tax credit on the purchases that they must have made. In some cases, GST is paid directly to the Government by the customer or the buyer on a reverse charge basis.

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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.