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Why is GST Anti-Middle Class but Pro-Rich, Pro-Farmer?

When Indian Prime Minister Narendra Modi visited the White House, the pat came from the President for undertaking the daunting taks of bringing the entire 1.3 billion consumers of the country under one tax regime, making it easy for market access by sellers.

The huge transition to GST-managed tax regime may benefit those who buy white goods as discounts are visibly pushing the demand but not for the middle class, which is still reeling under demonetisation effect of last year.

Many working and salaried class families have woken up on Saturday to a high taxation as they started buying daily consumables. With one stroke, the entire unholy ‘service tax’ has gone up from 15% to 18% and immediately all banks and service providers have sent urgent SMS messages passing on the burden to consumers.

Ironic but all luxury items have seen dramatic reduction in tax structure as cars are on huge discount sale from Maruti Suzuki to Tata Motors, while mobile makers are advertising equally effective price reductions over night. Not far behind, homes will be cheaper now though an elusive dream for many.

Those in rural areas are still not affected by the GST regime. Moreover, fertilizers getting GST discount from 12% to 5%, the direct beneficiaries will feel lesser impact from the concurrent hike in prices of daily consumable items until GST spreads over the remote areas too.

But those who entered restaurants on their way to office on Saturday had to pay extra in the name of central GST tax and State GST tax. It is still not clear for them why there should be two GST taxes in the bill when the GST is being rolled out as one unified structure.

Essentially, the salaried middle class will begin to feel the impact. Since elections are far away, the government is not in a mood to revise these tax slabs on daily consumables for some time.

To offset the hike in consumable goods, commodities such as packaged cement, medicaments, smart phones, and medical devices have been showcased as products where the tax is reduced.

For instance, packaged cement worked out to more than 31% earlier but now it is 28% and if the government is expecting the builders to pass on benefits to buyers, then it’s a dream for many.

In case of medicaments, including Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systemsalso and other medicaments in general, the rate was down from 13% to 12% now and the impact will be hardly noticeable.

Smart phones attracted a tax of 13.5% earlier and now it is 12%. Similarly, medical devices, including surgical instruments, were under 13% tax will be under 12% GST, which is not a great reduction.

Only benefit for religious-minded people is that Puja Samagri has been placed under Nil category, to woo the women who would feel the impact of GST immediately.

Otherwise, India is no longer a poor country but a rich country for the rich and for those who marvel in rich lifestyle while those who believe in Mahatma Gandhi’s simplicity would be extinct soon.

About Naresh Kumar

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