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GST Led To Household Savings As Tax Rates Came Down, Says Official

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An average Indian household is saving up to Rs 320 every month on purchase of commonly used goods including cereals, edible oil and cosmetics post goods and services tax implementation, a finance ministry source said citing an analysis of consumer expenditure data.

An analysis of household expenditure pre-and post-GST rollout shows tax rates have come down on as many as 83 items including on food and beverages as well as daily use goods like hair oil, toothpaste, soap, washing powder and footwear, the source said.

If a household spends Rs 8,400 a month post-GST on 10 goods—cereals, edible oil, sugar, chocolates, namkeen and sweets, cosmetics and toiletries, washing powder, tiles, furniture and coir products and other household products—its monthly savings would come to Rs 320, the source explained referring to the expenditure analysis.

On a monthly spending of Rs 8,400 on these regular use items, the tax paid under GST is Rs 510. This compares to Rs 830 tax charged previously, resulting in a saving of Rs 320.

Customers browse household goods at a Big Bazaar hypermarket. (Photographer: Dhiraj Singh/Bloomberg)

The government rolled out the goods and services tax on July 1, 2017, amalgamating 17 different central and state taxes including excise duty and sales tax or VAT. The GST not just made India one market by levying uniform tax rates on goods and services, it also did away with tax-on-tax prevalent in the previous system.

Also Read: GST Collections Drop Below Rs 1 Lakh Crore In October

In the old system, the central government would levy excise duty when a good is produced in a factory and the state governments would charge VAT on top of this. This meant that consumer not just paid VAT on the basic price of the good but also on the excise duty charged by the centre.

With the introduction of the new indirect tax, that pattern has been eliminated. The GST is levied at the consumption end or when the final consumer buys the product or the service.

. Read more on GST by BloombergQuint.