GST impact: Things that may become cheaper or costlier

In a biggest tax reform, Goods and Service Tax (GST) Bill was approved by Rajya Sabha for a single unified value added tax system to turn the country into world's biggest single market. The Bill approved by the Upper House with 203 votes in favour and none against, after a seven-hour debate.

Setting a target of April 1, 2017 for rollout of the Goods and Services Tax, the government today unveiled a detailed roadmap for its implementation and said it is aiming for an optimal rate of taxation though the final decision will be taken by the GST Council. The Bill, which was cleared by the Rajya Sabha last night, is likely to be approved by the Lok Sabha this week after incorporating changes made by the Upper House.

Here are goods that may become costlier or cheaper due to GST:

Costlier

Cigarettes, aerated beverages, pan masala and tobacco and tobacco products may get costlier if sin or demerit rate of 40 percent is applied in these products.

Branded clothes

Branded clothes may get expensive as tax on branded apparel is likely to go up.

Phone bills

Mobile phone bills may get expensive as service tax gets dearer. Currently, telecommunication services are subject to service tax of 14 percent, which could increase to 18 percent under GST. We expect telecom companies to pass on the increased tax burden in case of postpaid subscribers.

Cheaper

Small cars, two-wheelers and commercial vehicles

At an 18 percent GST standard rate, the on-road prices for two-wheelers/smallcars and SUVs would be 5-10 percent lower than the current. However,  luxury cars like SUVs may become expensive if sin tax is levied.

According to Edelweiss, overall effective tax incidence will decline under GST and benefit original equipment manufacturers (OEMs)/consumers. Tractors may be charged at a concessional rate, though there is still no clarity. On the flip side, reduction of transit time for trucks (30-40 percent savings) due to abolition of multiple check posts may be a demand dampener for CV players in the medium term.

Car batteries

Battery players will benefit not only from lower tax rates but also due to shift fromsizeable unnorganised players in the aftermarket segment which currently avail taxadvantages. Price advantage, enjoyed by unorganised segment due to tax evasion, is expected to reduce, thereby benefiting organised players, says Edelweiss.

Soaps, Shampoos, detergent

FMCG products may become cheaper as these bear around 25 percent indirect tax rate which may likely come down.

Cement

Cement may get cheaper benefitting from lower effective tax rate under GST and savings in logistic costs.

Movie tickets

Movie tickets may get cheaper due to lower tax rate

Set Top Box

Tax rate for the sector is expected to decline. Special additional duty on imported equipment (mainly set-top boxes), which currently adds up in the capex cost, will get subsumed under GST and lower capex cost.