These Things Could Get Cheaper After GST

The GST is to become a reality after the GST Bill after the GST Council on Thursday decided to fix a four-tier rate structure for the reform touted to be the biggest after the economic liberalisation of 1991.The tax structure is 5, 12, 18 and 28 per cent, apart from higher taxes on hig-end luxury goods and tobacco. Here are some benefits for the common man. There is generally a VAT that is charged on produced goods of FMCG like soaps, detergents, cosmetics, apart from excise. The tax on tax would go after GST.FMCG companies will benefit from this single tax and their warehousing costs would also reduce. If they pass on the benefits to consumers, we may see lower prices of products like soap, toothpaste, detergents etc. By the same logic, electronics goods should also come down. The hope is that the GST benefits are passed onto the customer.Remember, that logistics costs and warehousing costs are major cost for electronic manufacturers and these are expected to come down after GST is implemented. Small cars prices could come down, as the incidence of taxes will fall from 24 per cent to 18 per cent, if the GST tax rate is capped at 18 per cent.We wish to emphasize that prices will fall, if and only if producers pass on the benefits of lower taxes to consumers. Or else, they might not change at all. Entertainment tax is very high, which is why multiplexes charge very high rates for tickets. If the GST rate is 18 per cent, entertainment tax would drop and ticket prices could be reduced. This is if and only if companies reduce prices. There is heavy competition for the organised sector from the unorganised sector in this business where they tend to escape taxes.With these companies now coming under ambit of taxes after the implementation of GST, it might allow larger companies to cut prices. We may see some drop in costs for companies in products like electrical wires, timber etc., as the unorganised sector would have to pay taxes. This may allow larger companies to drop prices. GST will lead to an increase in GDP of at least 2 per cent, which would lead to employment generation. GST is a single tax which will subsume various taxes, making the system efficient with very little chances of corruption.A big boon for the common man.