The weekend might have turned out to be a tad bit more expensive for those who enjoy to shop, eat out, or watch movies or do all of the above at a shopping mall. Yes, the Goods and Service Tax (GST) that came in to effect from midnight of July 1, 2017 would have caught many on their weekend outings by surprise.

Foodies, shopaholics, and regular cinemagoers will now have to shell out more for their goodies.
 

1. Air-conditioned restaurants are now pricier with a GST rate of 18%, up from the effective 5.6% tax rate earlier.
    
2. Apparels costing above Rs 1,000 will attract 12% tax compared to 5%, while footwear priced above Rs 500 with attract a GST of 18%.
    
3. Movie tickets above Rs 100 will cost more with 28% GST.
    

Therefore, if you enjoy weekends out, it is likely to affect your budgeted expenses.

While GST may lower prices for regular household items, your lifestyle choices will determine whether your outgoings will grow or decline in the coming months with the effect of GST.

PersonalFN outlines the items that may turn cheap and/or costly with the effect of GST. However, the revision of prices is at the sole discretion of the manufacturer or service provider. Hence, the analysis in the table below assumes that the base prices (price pre-tax) remains unchanged.

Daily use items under GST

Food items: Salt, cereals, puffed rice, papad bread etc. are exempt from taxes as earlier. However, the moment you indulge in branded items for daily consumption, it would cost you dearer depending on what you buy. For example, branded rice, branded honey, sauces, jams, soups, exotic tea & coffee, etc. will cost you more under GST. Below is a brief list of what may get cheaper or costlier compared to the earlier tax regime.
 

Cheaper	GST Rate	Pre GST rate*		Costlier	GST Rate	Pre GST rate*
Tea	5%	6%		Preserved vegetables	18%	0%
Bakery products	5%	12%		Butter, ghee, cheese	12%	6%
Vegetable oils	5%	12%		Dry fruits	12%	6%
Refined sugar	18%	26%		Frozen meats	12%	6%
Milk beverages	12%	26%		Branded paneer	5%	0%
Namkeen/Bhujiya	12%	26%		Branded cereals	5%	0%

*For the state of Maharashtra
(Source: Bloomberg.com, PersonalFN Research)
Personal care: With toothpaste, soaps, hair oils, detergent powder, etc. getting cheaper, basic personal hygiene costs will minimise. On the other hand, men toiletries, skin care items, and makeup kits have gotten costlier.
 

Cheaper	GST Rate	Pre GST rate*		Costlier	GST Rate	Pre GST rate*
Toothpaste	18%	26%		Dental floss	28%	26%
Soap	18%	26%		Deodorants & perfumes	28%	26%
Hair oil	18%	26%		Shaving cream & After shave	28%	26%
Toilet paper	18%	19%		Skin care item like sunscreens	28%	28%
Detergents	18%	26%		Shampoos & Hair dyes	28%	26%
				Makeup & manicure sets	28%	26%

*For the state of Maharashtra
(Source: Bloomberg.com, PersonalFN Research)
Household products: Home appliances/White goods such as washing machine, fans, air-conditioners, coolers, dishwasher, vacuum cleaner, refrigerator, furniture, etc. will cost you dearer. Therefore, if you did not avail of the pre-GST offers, get ready to shell out more if you are planning to upgrade or replace your appliances. However, the most basic products, sparing agarbatti’s, will attract a lower tax.
 

Cheaper	GST Rate	Pre GST rate*		Costlier	GST Rate	Pre GST rate*
Broomsticks	5%	18%		Agarbatti	5%	0%
Candles	12%	26%		Hot plates/Induction Stoves	28%	19%
Handmade safety matches	5%	19%		Plastic products	28%	19%
Aluminum utensils	12%	19%		Solar water heater	5%	0%
Iron/Steel/Copper articles	5%	19%		Air conditioners/ Refrigerators	28%	26%
LED Lights	12%	26%		Wooden furniture	28%	26%

*For the state of Maharashtra
(Source: Bloomberg.com, PersonalFN Research)
Miscellaneous items: Buying your favourite leather bag, wristwatch, and accessories could turn out to be expensive. But prices of bicycles, motorcycles, cars could fall depending on the segment in each of these you buy. If you decide to drive or ride around in a petrol or diesel vehicle, you don’t have to worry about the fuel bill, as these are not a part of GST for now.
 

Cheaper	GST Rate	Pre GST rate*		Costlier	GST Rate	Pre GST rate*
Sports goods	12%	18.5%		Leather bags	28%	6%
Bicycles	12%	18.5%		Cell Phones	18%	6%
Fitness supplements	18%	26%		Wristwatches	28%	26%

*For the state of Maharashtra
(Source: Bloomberg.com, PersonalFN Research)
Services under GST

Financial services: Service charges for banking and insurance products will turn costlier. Hence, charges on fund transfers, processing fees, credit card payments, premium payments etc. will cost more as they will attract a higher tax. While banking services will attract a 18% GST rate up from 15% earlier, insurance premiums will be charged as per the table below.
 

Product Type	Applicable On	GST Rate	Pre GST rate
Term Policy	Premium payable	18%	15%
Unit Linked Insurance Policy	All applicable charges	18%	15.0%
Riders	Premium Payable i.e. Accidental Death Benefit Rider	18%	15%
Health Insurance Policy	Premium Payable	18%	15.0%
Endowment Policy	First Premium	4.50%	3.75%
Endowment Policy	Premium Payable i.e. Regular Premium	2%	1.9%
Single Premium Annuity Policy	Premium Payable	1.80%	1.50%

(Source: iciciprulife.com, PersonalFN Research)
Telecom services: Don’t be surprised if you receive a slightly higher bill for your landline, broadband, mobile bills effective July 1, 2017, as the GST rate applicable is 18% as against the previous service tax of 15%.

Transport services: The cost of travelling will change depending on the class of travel you opt for. While the economy-class air tickets will attract a lower tax, business class travel will get costlier. The new tax rates shall be applicable on tickets issued on or after July 1, 2017.
 

Cheaper	GST Rate	Pre GST rate		Costlier	GST Rate	Pre GST rate
Economy Air Tickets	5%	6%		Business/Premium/First-class Air Tickets	12%	9%
App-based Taxis	5%	6%		AC train travel	5%	4.5%

(Source: Bloomberg.com, PersonalFN Research)
If you choose to ride on the local trains or metro, and by outstation trains or special trains for religious tour anywhere in India in the non-AC class, these are exempted from GST.

To conclude…

As you can see, the overall impact of GST will depend entirely on your spending habits. Many may benefit from lower rates and GST is lower or exempt for basic goods and most items of daily needs. However, if you seek added convenience or branded products, be prepared to pay a higher price.

For most services, you will be unable to escape the higher tax rates. Mobile bill payments, credit card bill payments, utility payments form a significant part of a household budget. Hence, do factor this in when you rework your budgeted expenditure.

Most companies such as Hindustan Unilever, Maruti Suzuki, Future Retail, Apple and a few others have proactively reduced the prices of their products. Given the immense competition in the consumer industry, others may follow suit.

Keep a track of your total expenses to check how your budget stands under GST. If your expenses have shot up due to higher taxes, take corrective measures immediately.

PersonalFN is of the view that effectively managing your household budget will not only help steer your finances back on track, but may also save money for emergencies and meet the financial objectives of the family.

Don’t hesitate to seek the advice of a Financial Guardian Financial Guardian who can professionally and prudently hand-hold you in the journey of wealth creation. Irrespective of where you stand with your finances, it is a wise decision to seek a second opinion. You will be able to evaluate and choose a Financial Guardian here.

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