GST

to households. To be sure, in percentage terms, the ₹320 per month in savings is a small portion of household earnings and spending. The sum is not small for the poor and the neo-middle class, one of the officials cited above added. “GST has helped the common man by adding some more money in his monthly kitty. Direct taxes are paid by those who have a certain level of income, but indirect taxes are paid by every person. In pre-gst era, it was largely in the range of 21% to 33% or even more on various goods or services or commodities but with the GST regime, the indirect taxes were reduced on most of the essential goods and services,” the official said.

Savings on edible oil after the introduction of the GST is estimated at ₹15 a month per household; the GST regime reduced tax on the product from 6% to 5%, the note said. Similarly, the tax rate on sugar was reduced from 6% (pre-gst) to 5%, resulting in a saving of ₹6 per month.

The internal analysis also included monthly household consumption of chocolates, on which the saving was estimated at ₹25 per month because the indirect tax on the product had been lowered to 18% from 28%. A saving of ₹13 per month is estimated on namkeen, or salted snacks, (12% levy pre-gst) and sweets (7%), on which the levy was reduced uniformly to 5% under the GST regime, the note said.

Each household saved ₹19 per month on cosmetics and toiletries after the tax incidence on them came down from 27% to 18%, ₹11 a month on detergent (28% pregst levy slashed to 18%), ₹43 on tiles and other sanitary material and ₹24 on furniture and coir products, the finance ministry note said. Prior to GST, tiles and other sanitary materials attracted 28% tax, furniture (12%) and coir products (28%). While the GST on coir products, tiles and other sanitary materials is 18%, it is only 5% on furniture.

According to the note, a household saved ₹70 per month on other miscellaneous products such as spices, curry paste, hair oil, soap, toothpaste, rubber bands, footwear, brooms and school bags.

The officials quoted above said prices of most of the goods and services had come down because of a sharp reduction in indirect taxes under the GST regime.

“In fact, impact of GST on rates of several products is more than the differences in levies between pre- and post- GST regime because several other local taxes {used to be levied under the old regime}. Levies like entry tax and octroi had an impact of about 2% on the cost of products,” the second official said.

Consumers, particularly the middle class, have been also the beneficiaries of massive tax reductions on services under the GST system, the official said. “Two major services consumed by middle class, namely, health care services provided by clinical establishments and educational services provided by educational institutions are exempted from GST,” the official noted. “The GST rate on services provided by restaurants, eating joints etc generally has been reduced from 18% to 5%. As against this, in the pregst period cumulative incidence of all subsumed taxes in respect of restaurant services was about 20%,” he added.

The GST rate on cinema theatres with an entry ticket of upto ₹100 has been prescribed at a reduced rate of 18%. The pre-gst incidence of entertainment tax was about 30% while that of value-added tax (VAT) and excise duty was about 27%, he said.

“Entertainment tax was a turnover tax while GST is a value added tax,” he added.

Vishal Raheja, deputy general manager of tax research and consulting firm Taxmann said the introduction of GST, which subsumed a range of central, state and local taxes, had helped in removing the cascading effect of taxes. “Earlier, there was tax on tax due to various indirect taxes mainly excise, VAT, octroi. Now, this cascading affect has been removed and government has specially focused on household items before affixing GST rates. The rates have been fixed and further rationalised in such a manner that necessary items for households have been categorised in lower tax slabs, which results in saving to common man post GST implementation.”

Some experts said the savings on household items should be seen in the context of the costs of other products and services and inflation. “If the argument is that GST has allowed an urban household a saving of ₹320 in a month, it seems weak, given that per capita income is roughly ₹10,500 per month; this is merely 3% of that,” sad Archit Gupta, founder and CEO of Cleartax, a financial technology platform providing tax andinvestment-relatedsolution,

“More depth is required here, for example we cannot look at this on a stand-alone basis without including increase in cost of services consumed and rise in the cost of living, including that of fuel prices, since the coming of GST.”