Sunday, June 23, 2024

New GST Tax laws, boon or bane for the common man?

GST has become a term that affects our pockets directly or indirectly, whether you own a business, run a company, have a 9 to 5 job or are an entrepreneur. The repercussions of this integrated tax is enormous in our day-to-day life.  To put things in perspective, CorpIndiaNews takes a detail analysis of the latest GST notifications in GST laws published by GST Council for FY 2022-23.

For beginners, let’s begin to understand what GST actually means before diving deeper into understanding the context of impact of the new notifications in tax laws.

What is GST?

GST , short for Goods and Services Tax, is a multi-stage-oriented tax imposed at every point of sale, replacing various multiple taxes such as VAT, service tax, custom fees, to name a few. GST centralizes tax returns under a single domestic indirect taxation law.

The GST model for India was concluded by task force headed by former finance ministry advisor, Vijay L. Kelkar under the vision of former Prime Minister, Shri Atal Bihari Vajpayee in 2000. After several attempts to propose a GST model since then, the four supplementary GST bills were approved by all cabinet ministers and members of the lower house, Lok Sabha, finally in 2017.

New GST Tax laws, boon or bane for the common man?

Before we proceed further into the articles, lets learn a few terms that will help you understand the GST updates and notifications after the recent amendments in central tax laws. To begin with, take a look at the brief below:

GST notification

GST notification is a regular update over central tax by the GST council of India. The GST revenue is collected by the central government from both, interstate and intrastate transactions.

To get accurate notifications, keep a tab of Cbec

Integrated Tax Rate

ITR also known as IGST (Integrated Tax Rate) is a tax that is levied on all inter-state supply chain of goods and services controlled and regulated by IGST Act. Any import or export made will be regulated under IGST. The Tax rate keeps changing, therefore, we suggest you keep a daily tab on schedules, notification, and due dates related to tax rate.

To get accurate information on IGST tax rate, keep a tab on GST Council of India

Income Tax Slabs

India is one of the only countries where there is a tax for all levels of employment process, be it individual, HUF, LLPs, partnership firms controlled and regulated by Income Tax India.. The tax applies to an array of income also known as Income Tax Slabs. The tax is levied as per the slab system if their income is above the minimum threshold limit (known as basic exemption limit ).

Let’s move forward with much discussed potential impact of the goods and services tax (GST) on inflation, and debatable rise in headline Consumer Price Index (CPI). The tax rates have impacted the consumption basket in various categories, challenging the composition of consumption of the end consumer.

New GST Tax laws, boon or bane for the common man?

Latest update in Common Man

As much as the new amended tax laws for GST remain indifferent for the business communities, on the flip side, the middle-class and lower-middle class communities may have to prepare themselves for one of the sharpest tax increases in areas of health, clothing and footwear, medicines and electricity, according to a report prepared by the Chief Economic Advisor of RNR. The expected tax increase is estimated between 8.8 % to 13.6% in healthcare products, excluding pharmaceutical drugs. While the forecast for clothing and footwear tax may rise up to 13.8% from 9.5%, currently. On the brighter side, the CPI shall witness a lower tax hike, exclusive of oil and fat making a decline in price rise by 0.6%.

In a survey conducted by Citizen Portal connected to Central Government Consumer Affair Department,  nearly 40, 000 applicants displayed their disappointment with price hike in basic household items making the house cost go out of their monthly budget of spending.

New shockers in 28% and18% tax bracket for the common man

The shocking introduction of  basic essential and miscellaneous needs such as sunscreen, pan-masala, weighing machine, vacuum cleaner, hair clippers, automobiles, fitness products have got many nodding their head in disdain. When it comes to service sector, any bill above 7,500 in hotels or restaurant, betting on casinos, racing, movie tickets will fall under 28% tax bracket. Prices of electronic device such laptops and mobile phones will now be treated under 12% from previously included in 8% tax bracket. With automobiles such as cars and bikes falling under the 28% bracket, citizens are afraid if they can afford it with contrasting price hike in essential goods and services. A relief revision would be much appreciated, as suggested by applicants on online forums and government portals.

However, on the brighter side, to impact the common man the government has revised five rules in tax laws functional since 1st January 2022. The amendments are said to decrease price of LPG cylinder, fewer charges on ATM cash withdrawals, deposit tax on India Post Payments Banks and transaction services related to ICICI.

However, to be on the safer side is to remain updated with changing tax rates under GST council.

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New GST Tax laws, boon or bane for the common man?

Dying hope for the poor

Data collected by RNR shows that the poor population has only 1 % stake in total expenditure on healthcare, which will rise up to 5.5% of total household expenditure after the new tax laws are implicated. To compare it with the rest of the population which spends 7.5% of their income on the same, it is expected that both strata of population are likely to be affected with the inclusion of some of the essential products in the 28% category. Read on to know what they are!

The national council of Economic Research in a study suggested that the implementation of new GST will result in drastic decline in the price of cotton textiles, silk and synthetic fibres by introducing them in 6% and 11% tax bracket.

Positive Impact of GST on the Common Man

  • GST was certainly a better replacement of indirect taxes such as VAT, CST, service tax, CAD, SAD, excise, to name a few.
  • Eliminated the overlapping situation of tax on tax, also known as the cascading effect of taxes.
  • Decreased manufacturing cost by reducing the burden of taxes, as a result prices of consumer goods go down.
  • Lower manufacturing cost is an invitation for more competitors which means the cost of automobiles and FMCG becomes affordable.
  • Affordable product opens the opportunity for a common man to spend less money for the same goods and services that cost them their whole life.
  • Increased demand is a key enhancer to supply chain. With GST the production is likely to increase, however this can only happen if the consumers are getting the products at a cheaper rate.
  • A unified tax system enables a secure protection to the common man’s wealth against malpractice and fraudulent activities.
  • Most importantly, experts expect to see a positive impact of GST on the Indian economy in the long run.

New GST Tax laws, boon or bane for the common man?

Negative impact of GST on the Common Man

  • Minimized compliance burden on tax collector’s end while adding more on the plate of the tax payer with the filing of GST.
  • Additional professional cost for filing GST services
  • Even with several attempts from the government to ease the tax filing process, to make return filing easier has not been successful
  • Small traders, service providers and merchants face challenges with the new complex model of GST
  • With the current rate of 15% being charged on services, GST at 28% proposed for services like telecommunication, air-travel, banking and financial services is sure going to dig a big hole down the pocket for many from their monthly expenses.
  • The common man is compelled to reset their budget to bear the cost of additional services.
  • To prevent the risk of loss, additional cost comes with obligatory dependencies on tax experts and professionals, which mean more business expenses.
  • GST is a new model, hence every new change in the law affects the structure and budgets of every individual, businesses and household.
  • GST is a consumption-based tax, therefore, revaluating the accounts on which the service tax should be applied needs a revisit.
  • If the consumers is not treated equally as the seller, the seller can increase the price of commodities during crisis.
  • The rise in inflation can be observed initially, however, it may also come down gradually.

Based on the above discussion, it is safe to say that the new amendments and notifications in GST laws are not forgiving the common man. However, it is not okay to judge a book by its cover. GST as a tax model is fairly new, therefore, challenges are paramount, however, we look forward to the brighter side of the amended laws as we enter into yet another gloomy financial year.

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