Goods and Services Tax, better known as – GST – has been making the headlines for quite a while now. According to the Government, this tax reform will prove to be beneficial for all of us in the long run. The good news is that GST rates on essential goods such as food grain, household consumer items, and essential services have been either exempt or kept lower.

GST has nothing to do with your take home salary.. You will keep drawing the same package and your salary breakup will stay unaffected.

But, it will ofcourse affect your spending. Let’s find out how.

EMI, home loan interest rates have temporarily gone up post-GST

In a recent article by the Financial Express, Apoorva Shridhar talks about how leasing of land, renting of buildings and EMI of under-construction houses, have attracted GST. Home loan borrowers have to pay a fixed GST of 18%, which is more than the previous VAT of 5%. There’s a small catch here. A number of hidden and cascading taxes don’t exist anymore, thanks to GST! 🙂

Since GST stands at 18% for home loans (i.e. applicable on loans for both completed and under-construction projects), interest rates are now high. So, the monthly installment (EMI) borne by a salaried person has gone up. But this is just a speculation and a temporary blip.The actual interesting picture will emerge only after a few months down the line. Meanwhile, if you rent or lease a property, you might have to shell out more money only for a few months now.

Quick Tip: Is it a good time to buy a house? Yes, provided you buy either ready-to-move-in houses or you invest in projects launched after July 1, 2017.

Car prices have dropped

According to Cardekho, the (Delhi ex-showroom) price of a small car like Maruti Suzuki Alto 800, has come down from 2.50 lakhs to 2.49 lakhs post-GST. More interestingly, the (Delhi ex-showroom) price of an SUV like Toyota Fortuner, has come down from 31.86 lakhs to 29.18 lakhs post-GST. That is some good news! 🙂

Data Source: CarDekho.

  • Insurance costs and loan EMIs on cars have increased (as GST Tax stands at 18% for all auto loans as well).
  • Prices of most small and medium sized cars (like Kwid, Alto 800 etc.) have either come down slightly or remain as is.
  • Prices of Sedans, Luxury cars and SUVs have reduced significantly.

Eating out is cheaper now

Here on, all Non-AC roadside eateries (that do not serve alcohol) will charge a tax of 12%. This list includes local delivery restaurants as well. If you plan to eat out in an AC restaurant (irrespective of whether it serves alcohol or not) you will be charged 18% tax on your total bill. Even non-AC eateries that serve alcohol, will charge 18% tax.

Hotel stay is affordable now

  • Hotel rooms with tariffs below INR 1,000 per day will be tax-free.
  • Rooms with a tariff below INR 2,500 will be taxed at 12%.
  • Hotel rooms in a 5-star and a non-5-star hotel having a tariff between INR 2,500 and 7,500, will charge 18% GST. This GST rate is applicable for all hotel rooms, irrespective of the hotel’s star/non-star ratings.
  • Any hotel room tariff above INR 7,500 will charge 28% GST.

Summary: If you choose to stay in budget and mid-range hotels, you can save at least 3% of your money. But luxury travelers will now have to shell out more as the taxes are as high as 28%.

Mid-range apparel and clothing prices have reduced

Post GST, any piece of apparel or clothing would be taxed at 5% GST if the taxable value of the good is below INR 1000 (per piece).  All types of apparel and clothing of sale value above INR 1000 (per piece) will be taxed at 12% GST. (These GST rates are also applicable on other textile products like curtains, blankets bed sheets etc.)

Similarly, footwear with a retail sale price below INR 500 (per pair) is taxed at 5% GST. For all other types of footwear, costing above INR 500 (per pair), a GST rate of 18% is applicable.

Pay less tax for movie tickets worth INR 100 or less

According to TOI, the GST Council has reduced the tax on movie tickets that are worth INR 100 or less. Tax on these tickets has come down from the previous 28% to 18%. However, tickets costing more than INR 100 will stay unaffected. That means, if you buy INOX/PVR tickets, you will be charged 28% tax.

Conclusion:

According to the Hindustan Times, Morgan Stanley reported “Analysts have no doubt that inflation will remain low as GST rates on essential goods such as food grain, household consumer items, and essential services have been either exempt or kept lower. ” In simple English, this means – GST has in a way, lowered the burden on the common salaried man.

So you and I will have to shed less money to buy the same products, which were costly before 31st June 2017. Don’t worry. The negative information is clearly part prediction and part speculation! So breathe in, relax and feel reassured. See the positive side of GST.

GST implementation will eventually increase demand for goods which will further boost production of items. This will bring down the prices of commodities. Hence, in the long run, it is going to be a win-win situation for everyone.

Until then, spend your hard-earned salary wisely! 🙂
You can check the change in popular consumer and lifestyle goods’ prices in India pre and post GST from here.

Salary