How New GST will affect your income!

How New GST will affect your income

In July this year, after being several years in planning, the Goods and Services Tax was finally rolled out by the Indian government. GST came with a number of tax slabs for different industries and quite a few debates about whether it was the right step or not. In all the debates that continue to rage till this day, one thing is sure, GST is here to stay and everyone should start planning their financial futures based on the changes brought in along with it. GST is a unified indirect tax levied on products and services across the country. It was introduced in order to establish uniformity in the taxes charged across the country, with states and the union governments not being able to levy taxes at varying rates at different points. With the blanket tax system, it is also bound to have an impact on the regular incomes of all Indians. Here are a few ways in which GST could end up affecting your income:

1. Impact on salaried employees

 


While there is a straight quantifiable impact on the businessmen, GST is also going to impact salaried professionals in a few ways. The employees working on full time basis with fixed salaries won’t be affected much under GST, but on the other hand, employees working with a company on a contractual basis or a retainership model will be affected directly. The contractual employees and the employees on retainers will have to pay an additional 18% GST apart from income tax filed annually. Doctors and teachers who are working on contractual or retainer basis are exempted from the additional taxes under this regulation.

2. Impact on businessmen

 

There is a direct impact of GST on businessmen, with four different slabs of GST having been introduced for businesses in different sectors. For small businessmen, with annual incomes up to Rs. 20 lakhs, there is a full exemption available. For the businessmen with annual incomes up to Rs. 50 lakhs, there are options available to apply for remedies available in forms of composition levy, wherein the minimum tax payable for manufacturers is 2.5% of the annual income while it is 1% for the others.

3. Impact on investments

Plan your future
The Goods and Services Tax will not have a major impact on your investments. If you are invested in mutual funds, the increase in service tax from 15% to 18% will lead to a higher Total Expense Ratio, which in turn will result in mutual funds becoming a tad expensive. The higher expense ratio will also lead to lower returns on mutual funds. Same goes for ULIPs, ELSS, stock market trading, brokerage fees, loan processing fees and other investment avenues.

4. Impact on banking

The 3% increase on service charge will also have a direct impact on a few banking services including the non-maintenance of minimum balance on the savings account and the ATM transactions done after the monthly transaction limit is crossed.

5. Impact on insurance

 

 

The premium payments that you make for existing insurance policies, be it term insurance plans, endowment plans, health insurance plans or unit-linked insurance plans, will increase with respect to the increase in service tax on insurance policies. On basic term insurances and health insurance plans, the service tax has been increased from 15% to 18%. The endowment plans used to charge service tax on 3.75% of the premiums, which has now been increased and will be charged on 4.5% of the premium. Premiums for other insurance plans like automobile insurance and travel insurance will also go up by 3% from 15% to 18%.

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