Will GST pinch your pocket or will it make you smile? Read on to know how the new tax regime is going to impact your household budget...
By Sahana Charan
The whole country is gearing up for the launch of the Goods and Services Tax (GST) on 1 July 2017. While there is a lot of anticipation regarding the changeover to the new tax regime, the regular consumers, including parents may not have enough clarity on what to expect.
Will I pay more school fees ? Do we have to cut down on our eating out ? These are some of the questions bothering the average parent. The good news is that a uniform tax system will be in place. In the existing system, a variety of Central and State taxes such as central excise duty, service tax, VAT, entertainment tax, luxury tax, etc., were being levied, which will no longer be applicable. For the tax-paying parent s, there will be more transparency on the taxes they pay and a reduction in multiple taxes and double taxation. Payment of taxes and filing of returns will become simpler as most of the processes can be completed online. “Those who pay through electronic transfers and credit or debit card will incur less taxes and cash transactions will be minimised. There will be some turbulence initially but in about two years this will pave way for a more stable and transparent economy, which will ultimately benefit the common man,” says Sachin Ramnivas Bansal, chartered accountant and finance expert.
Here we give you a lowdown on how GST will impact you as a parent –
1. Education – The Government has exempted the education sector from the ambit of any taxation. While this comes as a breather, we have to keep in mind that this is not going to bring down the school fees because education as a service was not taxed even under the pre-GST regime. “Expenditure on school education remains the same but it is up to the managements to undercharge or overcharge the parent. However, there will be some cap on increase in fees and government is bringing in regulations in that regard, so education expenses more or less remain the same,” says Mumbai-based senior Chartered Accountant, Ashok Shetty. Sending your child to a coaching institute, however, may bloat the monthly budget as private training and coaching fees may incur a GST of 12–18 per cent. As for the unending expenses on stationery, writing supplies, etc., post 1 July 2017, GST will be levied at 12 per cent on exercise books, notebooks and writing supplies, while children’s drawing and colouring books have been totally exempted from any charges. This could mean a mixed bag for school supplies as some things will get expensive while some might become slightly cheaper. WHAT’S UP – Coaching fees WHAT’S DOWN – Colouring Books
2. Entertainment – Your child kicking up a fuss to eat out in the weekends ? If you decide on a fancy fine-dine restaurant you might end up paying taxes as high as 18 per cent. Small restaurants and those without AC will only charge a GST of 12 per cent, as against the VAT and service tax that they were charging earlier (about 15 per cent), so eating in these humble places might turn out cheaper. Even dining at your neighbourhood fast-food chain may get costlier. But watching a movie or going to a theatre performance with your children will not burn a hole in your pocket. Following pressure from the entertainment industry, the government has cut back on high taxes for movie tickets. Earlier entertainment tax levied by the states could go up to 30 per cent. Now GST is charged between 18 to 28 per cent. WHAT’S UP – Restaurant expenses WHAT’S DOWN – Movie tickets
3. Food – You and your children can continue to enjoy your morning breakfast of bread and eggs without thinking twice about the cost as most essential items such as eggs, fruits and vegetables, pulses, flour and bread are exempted, as was the case in the pre-GST regime. But cost of certain packaged foods that children love such as chocolates, coffee, ketchup, jams, toppings and spreads will become dearer. The same goes for packaged chicken and ready-to-eat items such as pasta and noodles. The good news for parents of newborns and toddlers is that milk-based baby food and skimmed milk powder is set to become cheaper. WHAT’S UP – Chocolate and Ketchup WHAT’S DOWN – Baby Food
4. Milk and Milk products – Who doesn’t love to indulge their children with a dollop of butter on their toast or chapatti ? As milk comes under the essential goods category, it is exempted from tax. The cost of dairy products such as milk and cheese don’t go up but butter may become more expensive as the GST charged on it is 12 per cent. “The monthly budgeting for a household with children will go up a little because many items that are used on a daily basis are taxed at a higher rate. In the long term, however, the overall expenses might plateau and not pinch too much as long as manufacturers pass on the benefits that they get in the new tax structure,” says Prasanth Menon, content manager in a finance firm and a parent himself. WHAT’S UP – Butter WHAT’S DOWN – Milk and Cheese
5. Healthcare and medicines – The Government has exempted healthcare from GST, which means the old order will continue. There is not going to be much of a difference in the expense of taking your child to the clinic or getting treatment in a hospital. “This sector has more or less been unregulated, the discretion of increasing or decreasing fees lies with the management. But just like in education, the government is touted to bring in rules that will not allow the charges to become exorbitant. The prices of certain medicines and medical products such as insulin and stents will come down after GST and essential drugs will be cheaper,” says Sachin. WHAT’S DOWN – Essential drugs
6. Toys – Considering that we all love to gift our toddler a cuddly toy, or a new tricycle, , the high taxes for this bracket can be a spoiler. According to indiafilings.com, toys such as pedal cars and scooters will incur a GST of 12 per cent while electronic toys will be taxed at 18 per cent. Most other play items in this category, including video games and consoles, will become expensive because GST will be charged at 28 per cent. WHAT’S UP – Electronic toys and video games
7. Sporting goods – If your child has sporting dreams, then prepare to cough up a fortune on those new shoes with spikes. Sports supplies, including shoes, boxing gloves, swimming gear and the like, have been put in the highest tax bracket of 28 per cent. Cricket bats, balls and carrom boards will attract 12 per cent GST. Even gym equipment will become costlier. WHAT’S UP – Sporting gear and sports shoes
8. Transport – There is relief for those who frequently take cab rides in the city. Rides availed from some of the established cab operators will get a little cheaper because the tax component on cab bookings has come down from six to five per cent. If you like flying in style, get ready to cough up more on air travel because business class fares are poised to become steeper with GST of 12 per cent. But economy class tickets will attract a tax of only five per cent. AC train tickets will also become slightly expensive. WHAT’S UP – Flying in business class WHAT’S DOWN – Cab rides
9. Clothing and personal care products – Parents do not have to fret too much while going shopping for clothes post implementation of GST. Apparel costing less than ₹ 1000 will be taxed at a five per cent rate while high-end clothes will attract a GST of 12 per cent. This is not going to significantly affect your clothing budget. Home and personal care items are most consumed products in a household and will make the most impact on your budgeting for the month. According to Fast Moving Consumer Goods (FMCG) manufacturers, the tax rates on these products are more or less favourable. Items such as soap, hair oil and toothpaste will become cheaper, while shampoos, laundry detergents and premium home care products are likely will burn a hole in your pocket with a GST rate of 28 per cent. WHAT’S UP – Shampoo WHAT’S DOWN – Soap and toothpaste
10. Electronics – All consumer electronics like television, air-conditioners, fridge, washing machine, etc., have been categorised as luxury items and put in the 28 per cent tax bracket. The combined taxes on consumer durables including VAT levied by the states, Excise Duty and other local charges in the pre-GST regime was in the range of 28–30 per cent. Therefore the prices could possibly remain the same or come down slightly in the long term. WHAT’S DOWN – All electronic goods
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