Real benefit of GST will be visible in 12-18 months
The goods and services tax (GST) has caught the nation’s fancy — which is somewhat unprecedented for a change in tax regime.
However, despite all the efforts made by the government to demystify GST, people continue to be anxious (and confused) about whether the tax will be a game changer for every household. My aim is to give a thumbnail sketch of the potential after-effects, and, hopefully, alleviate this confusion a bit.
For consumers, pricing will probably be the most important parameter to evaluate the success of this reform. On this front, GST could turn out to be a mixed bag in the short run.
Retailers may have a tough time convincing consumers about prices, especially when products become costlier. So some dope on GST on, say, pamphlets should come in handy.
There is also a psychological aspect to this transition. As consumers, we are used to seeing only value added tax (generally between 5 and 15 per cent) on our bills. What we don’t see are the other hidden taxes, such as excise duty.
Now, when retailers print 18 per cent or 28 per cent (or even 40 per cent GST in some cases) on invoices, it might adversely affect the perceived value of products in consumers’ minds.
Try to appreciate the fact that before GST, taxes could have added up to or exceeded the new rate.(Agencies)