At the stroke of midnight when June 30 2017 turned into 1 July 2017, India put into place the biggest tax reform in seven decades of independence. The aim is to simplify the tax system and to replace various taxes with one flat rate of tax fixed for each product – the Goods & Services Tax. We look at items that will cost more and less, items that are now exempt from tax as well as highlights of the midnight launch.
Since different states currently have different tax rates and structures in place right now, whether rates for particular goods go up or down may vary from state to state. This also marks a change in India's federal structure. Critics have argued against GST for this very reason; that states are losing their power to tax and this power is now centralised.
Since Octroi is now absorbed within GST, this is a benefit that will accrue to people in bigger cities. Many sedans and SUVs will become cheaper including the high end vehicles. However, details are still being worked out, computers being recalibrated so clarity will emerge after a few days.
Several grades of footwear and clothing will become cheaper under GST. Some packaged foods, cinema tickets under Rs 100, wiring equipment, revenue stamps, economy air fare and several other things will get cheaper.
Fine dining and air fare for business class will cost more. Since FMCG items, aerated drinks, chocolates, luxury goods and lotteries are placed under a higher tax slab, these will cost more almost everywhere.
Mobile phones, high end cameras, dry fruits, laptops & desktops, leather bags, shampoo and perfume, plastic items and induction stoves will now cost more.
Necessities such as a milk, fruit & veggies, food grains, spices, cooking oils, sweets, natural fibres will get cheaper because they will be exempt tax.
It is thought that GST will boost GDP up to 2% and save common people the hassle of frequent tax rate changes. One market will help businesses and no octroi means fewer queues at state borders. More people in the tax net means higher revenues and less evasion. Meanwhile computerisation of sales systems, the apprehension over existing stocks, the nitty-gritty of frequent filing of tax returns and the worry about harassment from authorities are some concerns.
In his speech at the event to launch GST in the Central Hall of Parliament, Prime Minister Narendra Modi said that this was India's future being decided. President Pranab Mukherjee also spoke at the launch event, mentioning the fact of his own contribution to the GST set up process in his capacity as Finance Minister earlier. According to the President of India, GST is an indication of the "maturity and wisdom of the Indian democracy."
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