Is GST Beneficial for a Common Man?

Introduction:

GST is referred to as the Goods and Services Tax. It is an indirect tax that has replaced other indirect taxes in India, such as excise levy, VAT, tax on utilities, etc. The Goods and Service Tax Act was passed in Parliament on 29 March 2017 and came into force on 1 July 2017.

In other words, the Goods and Service Tax (GST) is imposed on the purchase of goods and services. Goods and Services Tax Law in India is a multi-stage, comprehensive, destination-based tax levied on any value-added. GST is a common domestic indirect tax law for the whole nation.

Goods and Services Tax is considered to be the biggest tax reform since 1947. It aims to balance the tax system in such a manner that a common tax is charged on the purchase of goods and services. The journey of the GST started in the year 2000 when a committee was set up to draft legislation. It took 17 years for the law to evolve. The GST bill was passed in the Lok Sabha and Rajya Sabha in the year 2017. The law on GST came into force on 1 July 2017. Today, around 160 countries have adopted GST / VAT in some way or another. VAT is a replacement for GST in some countries.

Impact of GST in India

In India, a large of the population is of the middle class and the lower middle class, where people either belong to the service category or depend on agriculture for their livelihoods. The main concern of these categories of people is: “Roti, Kapda, and Makaan.” Therefore, the most important question arises as to how they will be affected by the implementation of the GST.

For common people, when prices goods and services consumed on a regular basis are low, the economy is good. On the other hand, when it is higher, the public becomes dissatisfied with the changes made by the government. Therefore, in order to implement any policy of the Government, it is important that there should be public satisfaction as if the policy would not succeed in the same in which the government has planned.

The new GST act is expected to make essential goods cheaper and luxury goods expensive, with the aim of unifying indirect taxes for all states across India. The tax rate under the new GST regime is as follows: 0 %, 5 %, 12 %, 18 % and 28 % for various goods and services, and almost half of goods and services fall within 18 % of the tax rate. So, it seems to have a mixed impact on common’s pocket.

Positive Impact of GST on a Common Man

In general, GST removed the cascading effects on the sale of goods and services. The removal of the cascading effects has had an impact on the cost of goods. As the GST scheme eliminates the tax on goods, so the cost of goods decreases.

In addition, GST is mainly technologically driven. All operations such as registration, return filing, refund request and response to notification must be carried out electronically at GST portal.

• Household Expenditures: under the new GST regime, food items such as bread, milk, pulses, fruit and vegetables, tea and coffee have been kept outside the scope of GST. Products such as soaps, packaged food, toothpaste, hair oils, shampoos, electronic items such as TV, coolers, etc. are likely to get cheaper. Whereas, in facilities such as dry cleaning, salon etc., people need to pay more in the post-GST period. Again, with effect from January 18, 2018, some items like Sugar Boiled Confectionery, Drinking Water Boiled in 20 litres bottles, etc. also got cheaper by shifting the rate from 18 per cent to 12 per cent slab.

• Apparels and Garments: under GST, the price of clothing and articles made up will be cheaper.  The price of clothing and articles produced below the range of Rs 1,000 per piece will attract 5% GST rate, while the price of clothing and articles produced above the range of Rs 1,000 per piece will attract a 12 per cent GST rate. Whereas in the case of footwear costing below, the range of Rs 1,000 per pair will generate a 5% GST rate.

• Restaurants: The revised tax system is expected to have a favourable effect on local/ small restaurants businesses and food suppliers, as a lower tax rate will also allow consumers to buy more. Let us explain with an example to have a better understanding. Suppose we buy a snack at the counter or outside the shop; it only attracts a 5% GST fee. But the rate can range from 5% to 18% based on the facilities we have at our disposal. When one wishes to have the same snack sitting at the AC restaurant, the GST rate of 18 % is available.

• Cost of train tickets: GST does not have a major effect on commuter rail travel. There is a 0.5 per cent rise in ticket rates and travel costs. Yet such a hike would have no effect, or may not even be significant, depending on the actual price of the fare.

• Car prices: Several firms have updated the prices of vehicle types for the GST roll-out. Indeed, the implementation of the GST, the price of some cars would be higher, while the costs of some other vehicles will be cheaper. Today, 28 per cent of the GST will be levied on the buying of a vehicle with an extra cessation of between 1% and 15%.

• Real Estate: Prior to the introduction of the GST, the owner of the property was liable to pay various taxes, including VAT, registration, stamp duty and service charge, which contained varying rates and often differed from one country to another. Nevertheless, the introduction of the GST clearly affects the taxation of real estate in India.

• The unified tax system would lead to less graft, which would have an indirect effect on the common man. Low prices would further increase the demand/consumption of commodities. Increased demand will lead to an increase in supply. This will then eventually contribute to an increase in the output of products. Increased production will lead to more job opportunities in the longer term.

1. IT sector: Improved use of the IT industry in the GST would eliminate the human interaction between the taxpayer and the tax administration, which will go a long way towards eliminating corruption. It will Increase the export and manufacturing activities and create employment for the common man in India.

Finally, it will help to eliminate poverty by creating more jobs and more financial resources.

Negative Impact of GST on a Common Man

• Cost of education: With the introduction of the GST, the cost of education is getting more costly. A lot of people figured that GST wouldn’t strike students hard, but it appears to be false. Education is one of the most important sectors for every society, fostering better understanding, future outlook, innovative ideas, etc. In today’s competitive world, students need the right platform and future prospective education, which has led to the establishment of educational institutions for students. As institutions and universities are kept outside the scope of the GST, they are expected to levy 18 per cent of the tax as against 14 per cent of the tax under the previous regime. Therefore, it will be a matter of frustration to the student studying for the exams like government exams, CLAT, IITs, Medical exams, etc.

• Phone bills: The current tax system has raised pressure on cell phone subscribers. At present, both post-paid and pre-paid consumers have to pay more bills thanks to a 3% rise in the tax rate. Under the pre-GST, if the post-paid use is Rs 600, the total bill will be Rs 690. Yet under the post-GST system, if post-paid consumption is Rs 600, the cumulative bill would be Rs 708. So, one of them is charging Rs 18 more than he/ she was paying earlier.

• Regulation burden: you need to deposit your GST and file returns on schedule. GST returns filing is not as straightforward as it seems to be. You need to hire a tax professional to manage this. Although large companies with ample staff can handle the entire process very efficiently. But hat about small traders/service providers, or people who have just begun their company or service, isn’t it getting a little more complicated for them to handle.

While a significant number of officers have been trained and structured IT infrastructure has been developed for the effective implementation of GST. Nonetheless, it can take some time for individuals, whether suppliers, wholesalers, distributors or final customers, to grasp and implement the whole procedure correctly.

• Increase in service tax: As service tax increased to 18%, banking, telephone companies, credit cards, chit funds, insurance premiums, etc. got more costly.

Conclusion

The introduction of Goods and Services Tax (GST) is a long-term economic initiative implemented by the Government to simplify indirect taxes in India. It will also be too early to comment on the potential effect of GST. But it is expected that the positive effects will soon be positive. The introduction of different GST rates in all the states of the country also plays a key role in determining the actual impact of GST on the common man. The core problems for the middle-class family are “Roti, Kapda, and Makaan.” Originally, the country is worried by the current tax system due to the four slab rate structure under the GST. The new Goods and Service Tax (GST) act will soon benefit the country in the long term.

References:

• https://blog.saginfotech.com/gst-impact-on-common-man
• Agarwal, Ankit. “The Future of GST: What will be the long-term impact on the Indian Economy?.” QRIUS, 2018.
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• https://fintrakk.com/gst-what-is-the-impact-of-gst-on-common-man/#:~:text=GST%20or%20Goods%20%26%20Services%20tax%20removes%20cascading%20effect%20of%20taxes,manufacturing%20costs%20will%20be%20reduced.&text=Due%20to%20reduced%20costs%20some,burden%20on%20the%20common%20man.
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