By Shubhangi Chauhan
The next-generation Goods and Services Tax (GST) reform of the government which came into effect on Monday, 22 September, is likely to help the government cut down household costs and lower the prices of some of the basic and big ticket items.
The government estimates reveal that grocery bills will be reduced by approximately 13% monthly and the small car purchasers can save up to ₹70,000. Savings of between 7% and 12% will also be experienced on other consumer goods such as stationeries, clothes, footwear and medicines. Premiums of health and life insurance will also be cheaper since now they are fully tax-free leading to savings of up to 18%.
Overall, 375 products including the necessities such as food, medicines, agri-equipment and automobiles have gone down in prices under what Prime Minister Narendra Modi has termed as the GST Bachat Utsav (savings festival).
The government anticipates saving ₹40,000 on tractors with up to 1800 cc, since GST rates have been reduced to 5% instead of 12-18% on big ticket purchases. Customers who purchase two-wheelers with engines that are less than 350cc can save ₹8,000. Savings on television sets of above 32 inches are limited at ₹3,500 on air conditioners at ₹2,800, respectively, after a reduction in tax rates to 18% in the consumer durables category.
Speaking to the people on Sunday PM Modi claimed that the reform, along with the rise in income tax exemption to ₹12 lakh as announced in the Budget would be a double bonanza to the households. The total effect of the reduction of the GST and tax relief, as estimated by the government, will lead to savings of approximately ₹2.5 lakh crore to the people in a year.
The new structure has made GST to be reduced to two major slabs of 5% and 18%. The tax on ultra-luxury will be 40% and the tax that will be imposed on tobacco and its products will be in the 28% plus bracket.
GST had previously had four slabs – 5%, 12%, 18% and 28% since its implementation in July 2017. Currently, approximately 99% of products below the 12% bracket are now to be found in 5% and 90% of the products in the 28% bracket are found in the 18% category.