GST Course

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'Weekends don't count unless you spend them doing something relaxing.'

With the introduction of the Goods and Services Tax on 1st July 2017 spending on leisure or recreation activities is expected to burn a hole in your pocket.

Below is a sample illustration:

Mr. X and Mrs. X are newly married. They are in their early 30's. Mr. X earns 7 Lakhs p.a. while Mrs. X earns 7.56 Lakhs p.a. Hence their total income is 14.56 Lakhs (assuming net take home pay). They decided to follow a simple process of spending 25% of their income on Savings, Investments, Necessities and Recreational expenses respectively. 25% of Rs 14.56 Lakhs is Rs 3.64 Lakhs and hence per quarter the expense will be Rs 91000/- Below is their recreational expenditure of Rs 91,000 they are expected to spend for 13 weeks in the quarter.


Before GST

After GST

Week No.

Particulars

Estimated Exp

Previous Effective Rate*

Rs

GST Rate

Rs

Result

1

Movie Theatre (price> Rs 100)

1000

45%

450

28%

280

(170)

2

Amusement Park, Theme Park

2000

15%

300

28%

560

260

3

Bar & Restaurant

3000

18.5%

555

18%

540

(15)

4

Indian Premier League (price > Rs 500)

4000

20%

800

28%

1120

320

5

Clothes Shopping (price> Rs 1000)

5000

7%

250

12%

600

250

6

Gymkhana/Club

6000

18.5%

1110

18%

1080

(30)

7

Disco/Pub/Lounge/ Luxurious Locations

7000

25%

1750

28%

1960

210

8

Helicopter Ride (15 Minutes)

8000

15%

1200

28%

2240

1,040

9

Shopping Mall (Branded Merchandise)

9000

12.5%

1125

18%

1620

495

10

Yacht Cruise (2 Hours)

10000

18.5%

1850

28%

2800

950

11

Casino/Betting (Horse Race)

11000

18%

1980

28%

3080

1,100

12

Upgrading Gadgets (Once in 3 Months)

12000

6%

720

12%

1440

720

13

Resort Vacation 2N/3D (Tariff>2500)

13000

22.5%

2925

18%

2340

(585)

Total

91000

Net Increase

4,545


*Note: This refers to the average rate of tax in India. It includes Entertainment tax, Service Tax, Value Added Tax and other local body taxes.

As you can see from the sample illustration above, the couple will have to spend 5% {(4545/91000)*100} more on recreational expenses on account of GST.

Leisure lowers Stress and Depression. Mental wellness is an important part of your overall health and can impact your physical well-being. Recreation activities can help you better manage stress and reduce depression.

GST is an indirect tax. In indirect tax the ultimate burden is passed on to the customer. The big question is at what rate is the burden to be passed on? After the launch of GST, those having an optimistic view feel that multiple rates of taxes ensure that the major demerit of indirect tax being regressive in nature is done away with. It will reduce disparities between the rich and the poor.

But those having other views, feel that there should be a single rate of tax since the rich will spend more and will have an increased tax burden even with the same rate. For instance, if a hotel room is booked by a middle class person usually in a 3 star with a tariff of Rs 5000 the person spends Rs 900 as GST i.e. at the rate of 18%. If a rich person books a hotel room in a 5 star, with a tariff of Rs 15000 the person spends Rs 2700 as GST at the same rate of 18% which is more than the Rs 900 spent by the middle class person. If the person is taxed at the current rate of 28% for 5 star hotel room then the person has to spend Rs 4200. The rich person will argue that this is a double punishment, since such a person is already paying more income tax charged at a higher slab rate.

Irrespective of the view and counter view mentioned above, Mr X and Mrs X will realize that there is an increase in their weekend expenses at an average rate of 5% as per the above illustration. Hence they will have only one question in their mind, 'Kya yeh hai Achhe Din?'


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Category GST, Other Articles by - Craig Dsilva 



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