If you're a millennial, GST will make all this more expensive for you
The Goods and Services Tax (GST) is a system of taxation in India which merges many individually applied indirect taxes into a single tax. It is an imminent comprehensive indirect tax on the manufacture, sale and consumption of goods and services all over the Indian territory, and it is to subsume (incorporate and replace) a host of indirect taxes levied by the central and state governments at various points in the circulation of products and services within the country.
In March, 2017, Lok Sabha passed the four key supplementary GST Bills, bringing India one step closer to a uniform tax regime that should be rolled out by July 1, 2017. The two-day GST Council meet, chaired by Union finance minister Arun Jaitley, has declared tax slabs and cesses on 1,211 items.
GST has been aptly dubbed as a "revolutionary tax reform". But a revolution may not always be a good thing.
On one hand, we have a full exemption of taxes on foodgrains, milk and other articles of daily use such as eggs, curd, lassi, unpacked paneer, natural honey, fresh vegetables, fruits, flour, vegetable oil, common salt, contraceptives, bread, vermillion, stamp, judicial documents, printed books, bangles handloom products, etc under the GST regime. Common use products like hair oil, soaps and toothpaste will be charged at 18 per cent GST instead of present 22-24 per cent tax.
Even, ACs and refrigerators will fall in the 28 per cent tax slab. But, they are likely to be cheaper as they currently attract 31-32 per cent tax.
On the other, there are plenty of taxation changes that is likely to make life a little more difficult for the millennial. All luxury goods, aerated drinks and tobacco products are expected to be taxed at 28 per cent. Mobile bills, insurance premiums, banking charges, internet, WiFi and DTH services are likely to get costlier. Additoionally, school fees, courier services and air tickets to get expensive.
Make in India? Umm no
Sadly for us, most mobile phones may get costlier by 4-5 per cent. The government, imposing a GST of 12 per cent, takes away the benefit that was being offered to local manufacturers.
"29 out of 36 VAT jurisdictions in India have VAT rate on mobile phones of 5 per cent along with 1 per cent excise duty; thus, the total incidence is 6 per cent currently in most parts of the country," said Pankaj Mohindroo, president of Indian Cellular Association that represents handset makers including Apple, Samsung and Micromax among other to the Economic Times.
There is, however, a silver lining. Imported phones will become cheaper. For mobile phones imported and sold in India, the duty that varied between 17 per cent and 27 per cent, now comes down to 12 per cent.
Although it is still problematic. Almost 80 per cent of the phones sold in India (59 million) in January-March quarter were made locally, according to a report by Counterpoint Research. For a government focused on its flagship #MakeInIndia, this is not at all a great example being set here.
Additionally, prices of mobile phones on e-commerce platforms like Amazon, Flipkart, Snapdeal, Shopclues etc, where sellers of mobile phones have been supplying from low VAT states, primarily Karnataka, may now be higher than earlier, according to Bipin Sapra, partner, indirect taxes at Ernts & Young.
It’s not just the devices; it’s your phone bills as well. Mobile users will have to pay Rs 30 extra if their monthly phone bill is Rs 1,000 with the government imposing a GST of 18 per cent on telecom services. At present, telecom services attracts 15 per cent service tax, but once the new 18 per cent GST will mean a three per cent extra. The same will apply to pre-paid customers as well, only in terms that they will receive lesser talk time.
“The decision is a surprising one, given that you have an inter-ministerial panel looking into the financial woes of the sector, and the same time the government choosing to slap a higher GST rate that will hit consumption and negatively impact telco revenues,” said Ex-CEO of Bharti Airtel Sanjay Kapoor to Economic Times.
So much for Digital India, as well
With banking charges, internet, WiFi and DTH services looking towards a price hike, thanks to the GST, it's worth noting that this entire exercise goes against the prime minister's Digital India dreams.
Barely half a year ago, the entirety of the BJP government were out to convince the country to move towrads the internet, digital transactions and online financial technology. But an increase in bank charges and internet prices is hardly the way to go about that.
This amounts to, at the very least, almost going back on Modi government's Digital India promises. Or, is Digital India only for India's richie rich.