IMPACT OF GST ON

CONSUMERS

By

Dr. D. PAULRAJ
Vice Principal,
Associate Professor & Head,
PG & Research Department of
Commerce,
Voorhees College, Vellore
Historical background of GST
• GST was first recommended by Kelkar Task Force on
implementation of Fiscal Reforms and Budget Management Act
2004 but the First Discussion Paper on Goods and Services Tax
in India was presented by the Empowered Committee of State
Finance Ministers dtd.10th Nov.10th, 2009.
• In 2011, the Constitution (115th Amendment) Bill, 2011 was
introduced in Parliament to enable the levy of GST. However,
the Bill lapsed with the dissolution of the 15th Lok Sabha.
• Subsequently, in December 2014, the Constitution (122nd
Amendment) Bill, 2014 was introduced in Lok Sabha. The Bill
was passed by Lok Sabha in May 2015 and referred to a Select
Committee of Rajya Sabha for examination.
• Government is endeavoring to roll out GST by 1st July, 2017,
by achieving consensus on all the issues relating thereto. It is
geared to attain July 1 deadline for implementation of GST
across India.
• Under the GST scheme, no distinction is made between goods and
services for levying of tax. In other words, goods and services
attract the same rate of tax.

• GST is a multi-tier tax where ultimate burden of tax fall on the

consumer of goods/ services. It is called as value added tax
because at every stage, tax is being paid on the value addition.

• Under the GST scheme, a person who was liable to pay tax on his
output, whether for provision of service or sale of goods, is
entitled to get input tax credit (ITC) on the tax paid on its inputs.
MEANING
GST is a value added tax where tax is imposed only on the value
added at each stage in the supply chain. It is levied at all points in the
supply chain. Credit is paid for acquiring inputs used in making the
supply. In India GST is defined as “tax on supply of goods or services
other than alcohol for human consumption”. In simple language, GST
is a single tax on all goods and services in the entire economy.

GST can make the indirect tax system very efficient and will benefit
all stakeholders including manufacturers, sellers, the ultimate
consumers and the tax collecting governments apart from giving a
substantial boost to GDP growth.

GST will turn India into one common market, leading to greater ease
of doing business and big savings in logistics costs from companies
across all sectors. GST may not have a uniform impact on all sectors,
given their varying taxation structures. Some companies will gain
more as the GST rate will be lower than the current tax rates they pay,
others will lose as the rate will be higher than the present effective rate.
• The GST council has approved the rates of taxes on goods
and services in its 14th council meet held on May 18, 2017.

• The rates of individual commodities were taken up for

consideration in the four approved slab rates i.e. 5%, 12%,
18% and 28% with additional cess for demerit and luxury
goods.

• In the 14th meeting of the Council, about 60% of the items

will be in either the 12% or 18% tax brackets. Only 19% of
the items will be in the 28% slab, the highest rate.
OBJECTIVES OF GST
• One Country – One Tax
• Consumption based tax instead of Manufacturing
• Uniform GST Registration, payment and Input tax Credit
• To eliminate the cascading effect of Indirect taxes on single
transaction
• Subsume all indirect taxes at Centre and State Level under
• Reduce tax evasion and corruption
• Increase productivity
• Increase Tax to GDP Ratio and revenue surplus
• Increase Compliance
• Reducing economic distortions
CHALLENGES
With all of these being very significant objectives of GST, it
is still facing a lot of implementation issues. Some of them are:

• Complete lack of adaptation mechanisms and trained staff.

• In some cases, the double registration might annoy people.

Also, these registrations result in increase compliances and
cost.

• Unclear estimate of the exact impact of GST.

• No clear mechanisms to control tax evasion.

Advantages of GST

A. The advantages to the Citizens are listed as:

• Simpler tax system.
• Reduction in prices of goods and services due to elimination
of cascading.
• Uniform prices throughout the country.
• Transparency in taxation system.
• Increase in employment opportunities.

The advantages accruing to the Trade/ industry are listed as:

• Reduction in multiplicity of taxes.
• Mitigation of cascading/double taxation.
• More efficient neutralization of taxes especially for exports.
• Development of common national market.
• Simpler tax regime-fewer rates and exemptions.
Impact of GST on Consumer

The GST taxation laws will put an end to multiple taxes like
excise, CST, VAT, service tax etc., which are levied on different
products, starting from the source of manufacturing, till reaching
the end consumer. It will also stop distinguishing a goods from a
service and will tax both equally.

For consumers, GST will help bring in the following benefits–

1. Uniformity in Computing Taxes for Goods and Service:

GST will lead to the elimination of multiple excise, CST,
VAT, service tax calculations.

2. Uniform Tax Regime: For both goods and services and less
confusion in determining what constitutes a good or what is a
service.
3. Elimination of Double Taxation: Double taxation means
the consumer pays tax on an item, on which already
government has collected tax from the manufacturer under
some other head.

4. More Transparent Pricing: Currently hidden taxes actually

push up the taxes on a majority of goods to anywhere in the
27% to 32% range. But with GST coming in, the % tax
number is proposed to be much lesser - however the number
has not been finalized yet.

5. Most of the consumer items are in low tax bracket.

6. Input tax credit will be available was previously not

available.

7. No double taxation
IMPACT OF GST ON FOOD ITEMS

 No tax (0 per cent GST)

Unpacked foodgrains, fresh vegetables and fruits,
unbranded atta, maida, besan, gur, milk, eggs, curd,
lassi, unpacked paneer, unbranded natural honey,
palmyra jaggery, salt, fresh meat, fish, chicken,
butter milk, cereal grains hulled
IMPACT OF GST ON FOOD ITEMS
 5 per cent

Sugar, tea, roasted coffee beans, edible oils,

cream, skimmed milk powder, milk food for
babies, packed paneer, frozen vegetables, cashew
nuts, spices, pizza bread, rusk, sabudana, Raisin,
fish fillet, packaged food items
IMPACT OF GST ON FOOD ITEMS
 12 per cent

Butter, ghee, almonds, fruit juice, packed

coconut water, preparations of vegetables, fruits,
nuts or other parts of plants including pickle,
murabba, chutney, jam, jelly, bhujia, namkeen,
fruit juices, frozen meat products, dry fruits in
packaged form, animal fat and sausage
IMPACT OF GST ON FOOD ITEMS
 18 per cent

Biscuits (all categories), flavoured refined

sugar, pastries and cakes, preserved
vegetables, soups, ice cream, instant food
mixes, pasta, corn flakes, curry paste,
mayonnaise and salad dressings, mixed
condiments and mixed seasonings
IMPACT OF GST ON FOOD ITEMS
 28 per cent

Chewing gum, molasses, chocolate not

containing cocoa, waffles and wafers coated
with chocolate
IMPACT OF GST ON APPARELS/FOOTWEAR
0 per cent
Handloom

 5 per cent
Footwear (upto Rs 500), apparels (upto Rs 1,000)

12 per cent

Apparel above Rs 1000

 18 per cent
Footwear costing more than Rs 500, branded garments,
headgear and parts thereof
 IMPACT OF GST ON MOST USED
SERVICES
0 per cent
 Education services, health services, hotels and lodges with tariff below Rs 1,000,
grandfathering service. Rough precious and semi-precious stones (0.25 per cent).

5 per cent
 Transport services (Railways, air transport)

12 per cent
 State-run lotteries, non-AC restaurants, business class air ticket, fertilizers, work
contracts.

18 per cent
 AC hotels that serve liquor, telecom services, IT services, financial services,
room tariffs between Rs 2,500 and Rs 7,500, restaurants inside five-star hotels,
movie tickets below Rs 100.

28 per cent
 Private-run lotteries authorised by the states, hotels with room tariffs above Rs
7,500, 5-star hotels, race club betting, movie tickets above Rs 100. 
IMPACT OF GST ON PERSONAL CARE PRODUCTS 
 0 per cent
 Kajal, sindoor, bindi, bangles, 5 per cent

 12 per cent
 Tooth powder

 18 per cent
 Toothpaste, soap, toiletries, tampons, kajal pencil sticks,
hair oil, tissues

 28 per cent
 Deodorants, shaving creams, after shave, hair shampoo,
dye, sunscreen, shavers, hair clippers
IMPACT OF GST ON HOUSEHOLD ITEMS

 0 per cent
Prasad, phool bhari jhadoo
 5 per cent
Agarbatti, domestic LPG, bio gas, coir mats,
matting and floor covering
 12 per cent
Umbrella, sewing machine, spoons, forks, ladles,
skimmers, cake servers, fish knives, tongs
 28 per cent
Paint, wallpaper, ceramic tiles, water heater,
dishwasher, washing machine, vacuum cleaner
 IMPACT OF GST ON
HEALTH/AIDS
 5 per cent
 Medicines, stent, insulin, Braille paper, Braille
typewriters, Braille watches, hearing aids and
other appliances to compensate for a defect or
disability

 12 per cent
 Ayurvedic medicines, all diagnostic kits and
reagents, glasses for corrective spectacles and flint
buttons
HOW WILL GST AFFECT PRICES OF ELECTRONIC
DEVICES

 12 per cent
Mobile

 18 per cent
 Computers, printers, printed circuits,
camera, speakers and monitors, Electrical
Transformer, CCTV, Optical Fiber
 IMPACT OF GST ON
STATIONARY
 0 per cent
Children’s drawing and colouring books, printed
books, newspapers, stamps, judicial papers

 5 per cent
Postage or revenue stamps, stamp-post marks,
first-day covers

 12 per cent
Exercise books and note books
 OTHERS
 0 per cent
Jute, bones and horn cores, bone grist, bone meal, hoof meal, horn
meal, Human hair 
 5 per cent
PDS Kerosene, coal, lifeboats, ice and snow, kites
 12 per cent
Playing cards, chess board, carom board, ludo and other board games
 18 per cent
Bidi Patta, mineral water, tissues, envelopes, steel products,
Aluminium foil, weighing Machinery (non-electrical or electronic),
bamboo furniture, swimming pools and padding pools
 28 per cent
Automobiles, motorcycles, aircraft for personal use, bidis, pan masala,
aerated water, weighing machine, ATM, vending machines
 CONCLUSION
GST will definitely bring tax reforms, improve the
efficiency of the system and bring more tax revenue to the
government. This shall all add up to a better future for our country.
It is expected to result in reduction of pries of certain goods,
commodities and services which are of prime importance to
consumers. But, nothing can be predicted as of now. Since, there
remain a lot of issues to be resolved and not everyone is well versed
with all the provisions, it is unlikely the expected benefits will
trickle down just immediately.
So, consumers should wait and be patient enough to let the
system set in and not star judging the efficiency in the initial days.
Something as mammoth as GST will surely take its time to start
benefiting the society for whose benefit it is being implemented.
Also, a lot depends upon the implementation and its successive
strategies. Therefore, nothing can be predicted accurately as of now.
We can just hope and pray that GST has only positive effects on the
consumers.